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How to Write the Perfect Business Plan: A Comprehensive Guide

Thinking of starting a business here's the best step-by-step template for writing the perfect business plan when creating your startup..

Maybe you think you don't need a step-by-step guide to writing a great business plan . Maybe you think you don't need a template for writing a business plan. After all, some entrepreneurs succeed without writing a business plan. With great timing, solid business skills, entrepreneurial drive, and a little luck , some founders build thriving businesses without creating even an  informal business plan . 

But the odds are greater that those entrepreneurs will fail.

Does a business plan make startup success inevitable? Absolutely not. But great planning often means the difference between success and failure. Where your entrepreneurial dreams are concerned, you should do everything possible to set the stage for success.

And that's why a great business plan is one that helps you  succeed .

The following is a comprehensive guide to creating a great business plan. We'll start with an overview of key concepts. Then we'll look at each section of a typical business plan:

Executive Summary

Overview and objectives, products and services, market opportunities, sales and marketing.

• Competitive Analysis

Management Team

Financial analysis.

So first let's gain a little perspective on why you need a business plan.

Key Concepts

Many business plans are fantasies. That's because many aspiring entrepreneurs see a business plan as simply a tool--filled with strategies and projections and hyperbole--that will convince lenders or investors the business makes sense.

That's a huge mistake.

First and foremost, your business plan should convince  you  that your idea makes sense--because your time, your money, and your effort are on the line.

So a solid business plan should be a blueprint for a successful business . It should flesh out strategic plans, develop marketing and sales plans, create the foundation for smooth operations, and maybe--just maybe--persuade a lender or investor to jump on board.

For many entrepreneurs, developing a business plan is the first step in the process of deciding whether to actually start a business. Determining if an idea fails on paper can help a prospective founder avoid wasting time and money on a business with no realistic hope of success.

So, at a minimum, your plan should:

• Be as objective and logical as possible. What may have seemed like a good idea for a business can, after some thought and analysis, prove not viable because of heavy competition, insufficient funding, or a nonexistent market. (Sometimes even the best ideas are simply ahead of their time.)
• Serve as a guide to the business's operations for the first months and sometimes years, creating a blueprint for company leaders to follow.
• Communicate the company's purpose and vision, describe management responsibilities, detail personnel requirements, provide an overview of marketing plans, and evaluate current and future competition in the marketplace.
• Create the foundation of a financing proposal for investors and lenders to use to evaluate the company.

A good business plan delves into each of the above categories, but it should also accomplish other objectives. Most of all, a good business plan is  convincing . It proves a case. It provides concrete, factual evidence showing your idea for a business is in fact sound and reasonable and has every chance of success.

Who  must  your business plan convince?

First and foremost, your business plan should convince  you  that your idea for a business is not just a dream but can be a viable reality. Entrepreneurs are by nature confident, positive, can-do people. After you objectively evaluate your capital needs, products or services, competition, marketing plans, and potential to make a profit, you'll have a much better grasp on your chances for success.

And if you're not convinced, fine: Take a step back and refine your ideas and your plans.

Who  can  your business plan convince?

1. Potential sources of financing.   If you need seed money from a bank or friends and relatives, your business plan can help you make a great case. Financial statements can show where you have been. Financial projections describe where you plan to go.

Your business plan shows how you will get there. Lending naturally involves risk, and a great business plan can help lenders understand and quantity that risk, increasing your chances for approval.

2. Potential partners and investors. Where friends and family are concerned, sharing your business plan may not be necessary (although it certainly could help).

Other investors--including angel investors or venture capitalists--generally require a business plan in order to evaluate your business.

3. Skilled employees . When you need to attract talent, you need  something  to show prospective employees since you're still in the startup phase. Early on, your business is more of an idea than a reality, so your business plan can help prospective employees understand your goals--and, more important, their place in helping you achieve those goals.

4. Potential joint ventures. Joint ventures are like partnerships between two companies. A joint venture is a formal agreement to share the work--and share the revenue and profit. As a new company, you will likely be an unknown quantity in your market. Setting up a joint venture with an established partner could make all the difference in getting your business off the ground.

But above all, your business plan should convince  you  that it makes sense to move forward.

As you map out your plan, you may discover issues or challenges you had not anticipated.

Maybe the market isn't as large as you thought. Maybe, after evaluating the competition, you realize your plan to be the low-cost provider isn't feasible since the profit margins will be too low to cover your costs.

Or you might realize the fundamental idea for your business is sound, but how you implement that idea should change. Maybe establishing a storefront for your operation isn't as cost-effective as taking your products directly to customers--not only will your operating costs be lower, but you can charge a premium since you provide additional customer convenience.

Think of it this way. Successful businesses do not remain static. They learn from mistakes, and adapt and react to changes: changes in the economy, the marketplace, their customers, their products and services, etc. Successful businesses identify opportunities and challenges and react accordingly.

Creating a business plan lets you spot opportunities and challenges without risk. Use your plan to dip your toe in the business water. It's the perfect way to review and revise your ideas and concepts before you ever spend a penny.

Many people see writing a business plan as a "necessary evil" required to attract financing or investors. Instead, see your plan as a no-cost way to explore the viability of your potential business and avoid costly mistakes.

Now let's look at the first section of your business plan: The Executive Summary.

The Executive Summary is a brief outline of the company's purpose and goals. While it can be tough to fit on one or two pages, a good Summary includes:

• A brief description of products and services
• A summary of objectives
• A solid description of the market
• A high-level justification for viability (including a quick look at your competition and your competitive advantage)
• A snapshot of growth potential
• An overview of funding requirements

I know that seems like a lot, and that's why it's so important you get it right. The Executive Summary is often the make-or-break section of your business plan.

A great business solves customer problems. If your Summary cannot clearly describe, in one or two pages, how your business will solve a particular problem and make a profit, then it's very possible the opportunity does not exist--or your plan to take advantage of a genuine opportunity is not well developed.

So think of it as a snapshot of your business plan. Don't try to "hype" your business--focus on helping a busy reader get a great feel for what you plan to do, how you plan to do it, and how you will succeed.

Since a business plan should above all help you start and grow your business, your Executive Summary should first and foremost help you do the following.

1. Refine and tighten your concept.

Think of it as a written elevator pitch  (with more detail, of course). Your Summary describes the highlights of your plan, includes only the most critical points, and leaves out less important issues and factors.

As you develop your Summary, you will naturally focus on the issues that contribute most to potential success. If your concept is too fuzzy, too broad, or too complicated, go back and start again. Most great businesses can be described in several sentences, not several pages.

2. Determine your priorities.

Your business plan walks the reader through your plan. What ranks high in terms of importance? Product development? Research? Acquiring the right location? Creating strategic partnerships?

Your Summary can serve as a guide to writing the rest of your plan.

3. Make the rest of the process easy.

Once your Summary is complete, you can use it as an outline for the rest of your plan. Simply flesh out the highlights with more detail.

Then work to accomplish your secondary objective by focusing on your readers. Even though you may be creating a business plan solely for your own purposes, at some point you may decide to seek financing or to bring on other investors, so make sure your Summary meets their needs as well. Work hard to set the stage for the rest of the plan. Let your excitement for your idea and your business shine through.

In short, make readers want to turn the page and keep reading. Just make sure your sizzle meets your steak by providing clear, factual descriptions.

How? The following is how an Executive Summary for a bicycle rental store might read.

Introduction

Blue Mountain Cycle Rentals will offer road and mountain bike rentals in a strategic location directly adjacent to an entrance to the George Washington National Forest. Our primary strategy is to develop Blue Mountain Cycle Rentals as the most convenient and cost-effective rental alternative for the thousands of visitors who flock to the area each year.

Once underway, we will expand our scope and take advantage of high-margin new equipment sales and leverage our existing labor force to sell and service those products. Within three years we intend to create the area's premier destination for cycling enthusiasts.

Company and Management

Blue Mountain Cycle Rentals will be located at 321 Mountain Drive, a location providing extremely high visibility as well as direct entry and exit from a primary national park access road. The owner of the company, Marty Cycle, has over 20 years experience in the bicycle business, having served as a product manager for Acme Cycles as well as the general manager of Epic Cycling.

Because of his extensive industry contacts, initial equipment inventory will be purchased at significant discounts from OEM suppliers as well by sourcing excess inventory from shops around the country.

Because of the somewhat seasonal nature of the business, part-time employees will be hired to handle spikes in demand. Those employees will be attracted through competitive wages as well as discounts products and services.

460,000 people visited the George Washington National Forest during the last 12 months. While the outdoor tourism industry as a whole is flat, the park expects its number of visitors to grow over the next few years.

• The economic outlook indicates fewer VA, WV, NC, and MD cycling enthusiasts will travel outside the region
• The park has added a camping and lodging facilities that should attract an increased number of visitors
• The park has opened up additional areas for trail exploration and construction, ensuring a greater number of single-track options and therefore a greater number of visitors

The market potential inherent in those visitors is substantial. According to third-party research data, approximately 30 percent of all cyclists would rather rent than transport their own bicycles, especially those who are visiting the area for reasons other than cycling.

Competitive Advantages

The cycling shops located in Harrisonburg, VA, are direct and established competitors. Our two primary competitive advantages will be location and lower costs.

Our location is also a key disadvantage where non-park rentals are concerned. We will overcome that issue by establishing a satellite location in Harrisonburg for enthusiasts who wish to rent bicycles to use in town or on other local trails.

We will also use online tools to better engage customers, allowing them to reserve and pay online as well as create individual profiles regarding sizes, preferences, and special needs.

Financial Projections

Blue Mountain Cycle Rentals expects to earn a modest profit by year two based on projected sales. Our projections are based on the following key assumptions:

• Initial growth will be moderate as we establish awareness in the market
• Initial equipment purchases will stay in service for an average of three to four years; after two years we will begin investing in "new" equipment to replace damaged or obsolete equipment
• Marketing costs will not exceed 14 percent of sales
• Residual profits will be reinvested in expanding the product and service line

We project first-year revenue of $720,000 and a 10 percent growth rate for the next two years. Direct cost of sales is projected to average 60 percent of gross sales, including 50 percent for the purchase of equipment and 10 percent for the purchase of ancillary items. Net income is projected to reach $105,000 in year three as sales increase and operations become more efficient.

And so on ...

Keep in mind this is just a made-up example of how your Summary might read. Also keep in mind this example focused on the rental business, so a description of products was not included. (They'll show up later.) If your business will manufacture or sell products, or provide a variety of services, then be sure to include a Products and Services section in your Summary. (In this case the products and services are obvious, so including a specific section would be redundant.)

Bottom line:  Provide some sizzle in your Executive Summary, but make sure you show a reasonable look at the steak, too.

Providing an overview of your business can be tricky, especially when you're still in the planning stages. If you already own an existing business, summarizing your current operation should be relatively easy; it can be a lot harder to explain what you plan to  become .

So start by taking a step back.

Think about what products and services you will provide, how you will provide those items, what you need to have in order to provide those items, exactly who will provide those items, and most important, whom you will provide those items to.

Consider our bicycle rental business example. It's serves retail customers. It has an online component, but the core of the business is based on face-to-face transactions for bike rentals and support.

So you'll need a physical location, bikes, racks and tools and supporting equipment, and other brick-and-mortar related items. You'll need employees  with a very particular set of skills  to serve those customers, and you'll need an operating plan to guide your everyday activities.

Sound like a lot? It boils down to:

• What you will provide
• What you need to run your business
• Who will service your customers, and
• Who your customers are.

In our example, defining the above is fairly simple. You know what you will provide to meet your customer's needs. You will of course need a certain quantity of bikes to service demand, but you will not need a number of different types of bikes. You need a retail location, furnished to meet the demands of your business. You need semi-skilled employees capable of sizing, customizing, and repairing bikes.

And you know your customers: cycling enthusiasts.

In other businesses and industries, answering the above questions can be more difficult. If you open a restaurant, what you plan to serve will in some ways determine your labor needs, the location you choose, the equipment you need to purchase. And, most important, it will help define your customer. Changing any one element may change other elements; if you cannot afford to purchase expensive kitchen equipment, you may need to adapt your menu accordingly. If you hope to attract an upscale clientele, you may need to invest more in purchasing a prime location and creating an appealing ambience.

So where do you start? Focus on the basics first:

• Identify your industry. Retail, wholesale, service, manufacturing, etc. Clearly define your type of business.
• Identify your customer. You cannot market and sell to customers until you know who they are.
• Explain the problem you solve. Successful businesses create customer value by solving problems. In our rental example, one problem is cycling enthusiasts who don't--or can't--travel with bikes. Another problem is casual cyclists who can't--or choose not to--spend significant sums on their own bikes. The rental shop will solve that problem by offering a lower-cost and convenient alternative.
• Show how you will solve that problem. Our rental shop will offer better prices and enhanced services like remote deliveries, off-hours equipment returns, and online reservations.

If you are still stuck, try answering these questions. Some may pertain to you; others may not.

• Who is my average customer? Who am I targeting? (Unless you plan to open a grocery store, you should be unlikely to answer, "Everyone!")
• What pain point do I solve for my customers?
• How will I overcome that paint point?
• Where will I fail to solve a customer problem, and what can I do to overcome that issue? (In our rental example, one problem is a potential lack of convenience; we will overcome that issue by offering online reservations, on-resort deliveries, and drive-up equipment returns.)
• Where will I locate my business?
• What products, services, and equipment do I need to run my business?
• What skills do my employees need, and how many do I need?
• How will I beat my competition?
• How can I differentiate myself from my competition in the eyes of my customers? (You can have a great plan to beat your competition, but you also must win the perception battle among your customers. If customers don't feel you are different, then you aren't truly different. Perception is critical.)

Once you work through this list you will probably end up with a lot more detail than is necessary for your business plan. That is not a problem: Start summarizing the main points. For example, your Business Overview and Objectives section could start something like this:

History and Vision

Blue Mountain Cycle Rentals is a new retail venture that will be located at 321 Mountain Drive, directly adjacent to an extremely popular cycling destination. Our initial goal is to become the premier provider for bicycle rentals. We will then leverage our customer base and position in the market to offer new equipment sales as well as comprehensive maintenance and service, custom equipment fittings, and expert trail advice.

• Achieve the largest market share bicycle rentals in the area
• Generate a net income of $235,000 at the end of the second year of operation
• Minimize rental inventory replacement costs by maintaining a 7 percent attrition rate on existing equipment (industry average is 12 percent)

Keys to Success

• Provide high-quality equipment, sourcing that equipment as inexpensively as possible through existing relationships with equipment manufacturers and other cycling shops
• Use signage to attract visitors traveling to the national forest, highlighting our cost and service advantage
• Create additional customer convenience factors to overcome a perceived lack of convenience for customers planning to ride roads and trails some distance away from our shop
• Develop customer incentive and loyalty programs to leverage customer relationships and create positive word of mouth

You could certainly include more detail in each section; this is simply a quick guide. And if you plan to develop a product or service, you should thoroughly describe the development process as well as the end result.

The key is to describe what you will do for your customers--if you can't, you won't  have  any customers.

In the Products and Services section of your business plan, you will clearly describe--yep--the products and services your business will provide.

Keep in mind that highly detailed or technical descriptions are not necessary and definitely not recommended. Use simple terms and avoid industry buzzwords.

On the other hand, describing how the company's products and services will differ from the competition is critical. So is describing why your products and services are needed if no market currently exists. (For example, before there was Federal Express, overnight delivery was a niche business served by small companies. FedEx had to define the opportunity for a new, large-scale service and justify why customers needed--and would actually  use --that service.)

Patents, copyrights, and trademarks you own or have applied for should also be listed in this section.

Depending on the nature of your business, your Products and Services section could be very long or relatively short. If your business is product-focused, you will want to spend more time describing those products.

If you plan to sell a commodity item and the key to your success lies in, say, competitive pricing, you probably don't need to provide significant product detail. Or if you plan to sell a commodity readily available in a variety of outlets, the key to your business may not be the commodity itself but your ability to market in a more cost-effective way than your competition.

But if you're creating a new product (or service), make sure you thoroughly explain the nature of the product, its uses, and its value, etc.--otherwise your readers will not have enough information to evaluate your business.

Key questions to answer:

• Are products or services in development or existing (and on the market)?
• What is the timeline for bringing new products and services to market?
• What makes your products or services different? Are there competitive advantages compared with offerings from other competitors? Are there competitive disadvantages you will need to overcome? (And if so, how?)
• Is price an issue? Will your operating costs be low enough to allow a reasonable profit margin?
• How will you acquire your products? Are you the manufacturer? Do you assemble products using components provided by others? Do you purchase products from suppliers or wholesalers? If your business takes off, is a steady supply of products available?

In the cycling rental business example we've been using, products and services could be a relatively simple section to complete or it could be fairly involved. It depends on the nature of the products the company plans to rent to customers.

If Blue Mountain Cycling Rentals plans to market itself as a provider of high-end bikes, describing those bikes--and the sources for those bikes--is important, since "high-end cycling rentals" is intended to be a market differentiation. If the company plans to be the low-cost provider, then describing specific brands of equipment is probably not necessary.

Also, keep in mind that if a supplier runs out of capacity--or goes out of business altogether--you may not have a sufficient supply to meet your demand. Plan to set up multiple vendor or supplier relationships, and describe those relationships fully. 

Remember, the primary goal of your business plan is to convince  you  that the business is viable--and to create a road map for you to follow.

The Products and Services section for our cycling rental business could start something like this:

Product Description

Blue Mountain Cycle Rentals will provide a comprehensive line of bicycles and cycling equipment for all ages and levels of ability. Since the typical customer seeks medium-quality equipment and excellent services at competitive prices, we will focus on providing brands like Trek bikes, Shimano footwear, and Giro helmets. These manufacturers have a widespread reputation as mid- to high-level quality, unlike equipment typically found in the rental market.

The following is a breakdown of anticipated rental price points, per day and per week:

• Bicycle $30/$120
• Helmet $6/$30
• Customers can extend the rental term online without visiting the store.
• A grace period of two hours will be applied to all rentals; customers who return equipment within that two-hour period will not be charged an additional fee.

Competition

Blue Mountain Cycle Rentals will have clear advantages over its primary competitors, the bike shops located in Harrisonburg, VA:

• Newer equipment inventory with higher perceived quality
• Price points 15 percent below the competition
• Online renewals offering greater convenience
• A liberal return grace period that will reinforce our reputation as a customer-friendly rental experience

Future Products

Expansion will allow us to move product offerings into new equipment sales. We will also explore maintenance and fitting services, leveraging our existing maintenance staff to provide value-added services at a premium price.

When you draft your Products and Services section, think of your reader as a person who knows little to nothing about your business. Be clear and to the point.

Think of it this way: The Products and Services section answers the "what" question for your business. Make sure you fully understand the "what" factor; you may run the business, but your products and services are its lifeblood.

Market research is critical to business success. A good business plan analyzes and evaluates customer demographics, purchasing habits, buying cycles, and willingness to adopt new products and services.

The process starts with understanding your market and the opportunities inherent in that market. And that means you'll need to do a little research. Before you start a business you must be sure there is a viable market for what you plan to offer.

That process requires asking, and more importantly answering, a number of questions. The more thoroughly you answer the following questions, the better you will understand your market.

Start by evaluating the market at a relatively high level, answering some high-level questions about your market and your industry:

• What is the size of the market? Is it growing, stable, or in decline?
• Is the overall industry growing, stable, or in decline?
• What segment of the market do I plan to target? What demographics and behaviors make up the market I plan to target?
• Is demand for my specific products and services rising or falling?
• Can I differentiate myself from the competition in a way customers will find meaningful? If so, can I differentiate myself in a cost-effective manner?
• What do customers expect to pay for my products and services? Are they considered to be a commodity or to be custom and individualized?

Fortunately, you've already done some of the legwork. You've already defined and mapped out your products and services. The Market Opportunities section provides a sense-check of that analysis, which is particularly important since choosing the right products and services is such a critical factor in business success.

But your analysis should go further: Great products are great, but there still must be a market for those products. (Ferraris are awesome, but you're unlikely to sell many where I live.)

So let's dig deeper and quantify your market. Your goal is to thoroughly understand the characteristics and purchasing ability of potential customers in your market. A little Googling can yield a tremendous amount of data.

For the market you hope to serve, determine:

• Your potential customers. In general terms, potential customers are the people in the market segment you plan to target. Say you sell jet skis; anyone under the age of 16 and over the age of 60 or so is unlikely to be a customer. Plus, again in general terms, women make up a relatively small percentage of jet ski purchasers. Determining the total population for the market is not particularly helpful if your product or service does not serve a need for the entire population. Most products and services do not.
• Total households. In some cases determining the number of total households is important depending on your business. For example, if you sell heating and air conditioning systems, knowing the number of households is more important than simply knowing the total population in your area. While people purchase HVAC systems, "households" consume those systems.
• Median income. Spending ability is important. Does your market area have sufficient spending power to purchase enough of your products and services to enable you to make a profit? Some areas are more affluent than others. Don't assume every city or locality is the same in terms of spending power. A service that is viable in New York City may not be viable in your town.
• Income by demographics. You can also determine income levels by age group, by ethnic group, and by gender. (Again, potential spending power is an important number to quantify.) Senior citizens could very well have a lower income level than males or females age 45 to 55 in the prime of their careers. Or say you plan to sell services to local businesses; in that case, try to determine the amount they currently spend on similar services.

The key is to understand the market in general terms and then to dig deeper to understand whether there are specific segments within that market--the segments you plan to target--that can become customers and support the growth of your business.

Also keep in mind that if you plan to sell products online the global marketplace is incredibly crowded and competitive. Any business can sell a product online and ship that product around the world. Don't simply assume that just because "the bicycle industry is a $62 billion business" (a number I just made up) that you can capture a meaningful percentage of that market.

On the other hand, if you live in an area with 50,000 people and there's only one bicycle shop, you may be able to enter that market and attract a major portion of bicycle customers in your area.

Always remember it's much easier to serve a market you can define and quantify.

After you complete your research you may feel a little overwhelmed. While data is good, and more data is great, sifting through and making sense of too much data can be daunting.

For the purposes of your business plan, narrow your focus and focus on answering these main questions:

• What is your market? Include geographic descriptions, target demographics, and company profiles (if you're B2B). In short: Who are your customers?
• What segment of your market will you focus on? What niche will you attempt to carve out? What percentage of that market do you hope to penetrate and acquire?
• What is the size of your intended market? What is the population and spending habits and levels?
• Why do customers need and why will they be willing to purchase your products and services?
• How will you price your products and services? Will you be the low cost provider or provide value-added services at higher prices?
• Is your market likely to grow? How much? Why?
• How can you increase your market share over time?

The Market Opportunities section for our cycling rental business could start something like this:

Market Summary

Consumer spending on cycling equipment reached $9,250,000 in the states of VA, WV, MD, and NC last year. While we expect sales to rise, for the purposes of performing a conservative analysis we have projected a zero growth rate for the next three years.

In those states 2,500,000 people visited a national forest last year. Our target market includes customers visiting the Shenandoah National Forest; last year 120,000 people visited the area during spring, summer, and fall months.

Over time, however, we do expect equipment rentals and sales to increase as the popularity of cycling continues to rise. In particular we forecast a spike in demand in 2015 since the national road racing championships will be held in Richmond, VA.

Market Trends

Participation and population trends favor our venture:

• Recreational sports in general and both family-oriented and "extreme" sports continue to gain in exposure and popularity.
• Western VA and eastern WV have experienced population growth rates nearly double that of the country as a whole.
• Industry trends show cycling has risen at a more rapid rate than most other recreational activities.

Market Growth

According to the latest studies, recreation spending in our target market has grown by 14 percent per year for the past three years.

In addition, we anticipate greater than industry-norm growth rates for cycling in the area due to the increase in popularity of cycling events like the Alpine Loop Gran Fondo.

Market Needs

Out target market has one basic need: The availability to source bicycle rentals at a competitive price. Our only other competition are the bike shops in Harrisonburg, VA, and our location will give us a competitive advantage over those and other companies who try to serve our market.

You may want to add other categories to this section based on your particular industry.

For example, you might decide to provide information about Market Segments. In our case, the cycling rental business does not require much segmentation. Rentals are typically not broken down into segments like "inexpensive," "midrange," and "high-end." For the most part rental bikes are more of a commodity. (Although you'll notice in our Products and Services section, we decided to provide "high-end" rentals.)

But say you decide to open a clothing store. You could focus on high fashion, or children's clothes, or outdoor wear, or casual--you could segment the market in a number of ways. If that's the case, provide detail on segmentation that supports your plan.

The key is to define your market--and then show how you will serve your market.

Providing great products and services is wonderful, but customers must actually know those products and services exist. That's why marketing plans and strategies are critical to business success. (Duh, right?)

But keep in mind marketing is not just advertising. Marketing--whether advertising, public relations, promotional literature, etc.--is an investment in the growth of your business.

Like any other investment you would make, money spent on marketing must generate a return. (Otherwise why make the investment?) While that return could simply be greater cash flow, good marketing plans result in higher sales and profits.

So don't simply plan to spend money on a variety of advertising efforts. Do your homework and create a smart marketing program .

Here are some of the basic steps involved in creating your marketing plan:

• Focus on your target market. Who are your customers? Who will you target? Who makes the decisions? Determine how you can best reach potential customers.
• Evaluate your competition. Your marketing plan must set you apart from your competition, and you can't stand out unless you  know  your competition. (It's hard to stand out from a crowd if you don't know where the crowd stands.) Know your competitors by gathering information about their products, service, quality, pricing, and advertising campaigns. In marketing terms, what does your competition do that works well? What are their weaknesses? How can you create a marketing plan that highlights the advantages you offer to customers?
• Consider your brand. How customers perceive your business makes a dramatic impact on sales. Your marketing program should consistently reinforce and extend your brand. Before you start to market your business, think about how you want your marketing to reflect on your business and your products and services. Marketing is the face of your to potential customers--make sure you put your best face forward.
• Focus on benefits. What problems do you solve? What benefits do you deliver? Customers don't think in terms of products--they think in terms of benefits and solutions. Your marketing plan should clearly identify benefits customers will receive. Focus on what customers  get  instead of on what you provide. (Take Dominos; theoretically they're in the pizza business, but really they're a delivery business.)
• Focus on differentiation. Your products and services have to stand out from the competition in some way. How will you compete in terms of price, product, or service?

Then focus on providing detail and backup for your marketing plan.

• What is your budget for sales and marketing efforts? 
• How will you determine if your initial marketing efforts are successful? In what ways will you adapt if your initial efforts do not succeed?
• Will you need sales representatives (inside or external) to promote your products?
• Can you set up public relations activities to help market your business?

The Sales and Marketing section for our cycling rental business could start something like this:

Target Market

The target market for Blue Mountain Cycling Rentals is western VA, eastern WV, southwestern MD, and northern NC. While customers in the counties surrounding the George Washington National Forest make up 35 percent of our potential customer base, much of our market travels from outside that geographic area.

Marketing Strategy

Our marketing strategy will focus on three basic initiatives:

• Road signage. Access to the forest is restricted to a few primary entrances, and visitors reach those entrances after traveling on one of several main roadways. Since customers currently rent bicycles in the local town of Harrisonburg, road signage will communicate our value proposition to all potential customers.
• Web initiatives. Our website will attract potential visitors to the resort. We will partner with local businesses that serve our target market to provide discounts and incentives.
• Promotional events. We will hold regular events with professional cyclists, like demonstrations and autograph signings, to bring more customers to the store as well as to extend the athletes' "brand" to our brand.

Pricing Strategy

We will not be the low-cost provider for our target market. Our goal is to provide mid- to high-end equipment. However, we will create web-based loyalty programs to incent customers to set up online profiles and reserve and renew equipment rentals online, and provide discounts for those who do. Over time we will be able to market specifically to those customers.

Just as in the Market Opportunity section, you may want to include a few more categories. For example, if your business involves a commission-compensated sales force, describe your Sales Programs and incentives. If you distribute products to other companies or suppliers and those distribution efforts will impact your overall marketing plans, lay out your Distribution Strategy.

The key is to show you understand your market and you understand how you will reach your market. Marketing and promotions must result in customers--your goal is to thoroughly describe how you will acquire and keep your customers.

Also keep in mind you may want to include examples of marketing materials you have already prepared, like website descriptions, print ads, web-based advertising programs, etc. While you don't need to include samples, taking the time to create actual marketing materials might help you better understand and communicate your marketing plans and objectives.

Make sure your Sales and Marketing section answers the "How will I reach my customers?" question.

Competitive Advantage

The Competitive Analysis section of your business plan is devoted to analyzing your competition--both your current competition and potential competitors who might enter your market.

Every business has competition. Understanding the strengths and weaknesses of your competition--or potential competition--is critical to making sure your business survives and grows. While you don't need to hire a private detective, you do need to thoroughly assess your competition on a regular basis even if you plan to run only a small business.

In fact, small businesses can be especially vulnerable to competition, especially when new companies enter a marketplace.

Competitive analysis can be incredibly complicated and time-consuming, but it doesn't have to be. Here is a simple process you can follow to identify, analyze, and determine the strengths and weaknesses of your competition.

Profile  Current  Competitors

First, develop a basic profile of each of your current competition. For example, if you plan to open an office supply store, you may have three competing stores in your market.

Online retailers will also provide competition, but thoroughly analyzing those companies will be less valuable unless you also decide you want to sell office supplies online. (Although it's also possible that they--or, say, Amazon--are your  real  competition. Only you can determine that.)

To make the process easier, stick to analyzing companies you will directly compete with. If you plan to set up an accounting firm, you will compete with other accounting firms in your area. If you plan to open a clothing store, you will compete with other clothing retailers in your area.

Again, if you run a clothing store, you also compete with online retailers, but there is relatively little you can do about that type of competition other than to work hard to distinguish yourself in other ways: great service, friendly salespeople, convenient hours, truly understanding your customers, etc.

Once you identify your main competitors, answer these questions about each one. And be objective. It's easy to identify weaknesses in your competition, but less easy (and a lot less fun) to recognize how they may be able to outperform you:

• What are their strengths? Price, service, convenience, and extensive inventory are all areas where you may be vulnerable.
• What are their weaknesses? Weaknesses are opportunities you should plan to take advantage of.
• What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?
• What marketing strategies do they use? Look at their advertising, public relations, etc.
• How can you take market share away from their business?
• How will they respond when you enter the market?

While these questions may seem like a lot of work to answer, in reality the process should be fairly easy. You should already have a feel for the competition's strengths and weaknesses--if you know your market and your industry.

To gather information, you can also:

• Check out their websites and marketing materials. Most of the information you need about products, services, prices, and company objectives should be readily available. If that information is not available, you may have identified a weakness.
• Visit their locations. Take a look around. Check out sales materials and promotional literature. Have friends stop in or call to ask for information.
• Evaluate their marketing and advertising campaigns. How a company advertises creates a great opportunity to uncover the objectives and strategies of that business. Advertising should help you quickly determine how a company positions itself, who it markets to, and what strategies it employs to reach potential customers.
• Browse. Search the Internet for news, public relations, and other mentions of your competition. Search blogs and Twitter feeds as well as review and recommendation sites. While most of the information you find will be anecdotal and based on the opinion of just a few people, you may at least get a sense of how some consumers perceive your competition. Plus you may also get advance warning about expansion plans, new markets they intend to enter, or changes in management.

Keep in mind competitive analysis does more than help you understand your competition. Competitive analysis can also help you identify changes you should make to  your  business strategies. Learn from competitor strengths, take advantage of competitor's weaknesses, and apply the same analysis to your own business plan.

You might be surprised by what you can learn about your business by evaluating other businesses.

Identify  Potential  Competitors

It can be tough to predict when and where new competitors may pop up. For starters, regularly search for news on your industry, your products, your services, and your target market.

But there are other ways to predict when competition may follow you into a market. Other people may see the same opportunity you see. Think about your business and your industry, and if the following conditions exist, you may face competition does the road:

• The industry enjoys relatively high profit margins
• Entering the market is relatively easy and inexpensive
• The market is growing--the more rapidly it is growing the greater the risk of competition
• Supply and demand is off--supply is low and demand is high
• Very little competition exists, so there is plenty of "room" for others to enter the market

In general terms, if serving your market seems easy you can safely assume competitors will enter your market. A good business plan anticipates and accounts for new competitors.

Now distill what you've learned by answering these questions in your business plan:

• Who are my current competitors? What is their market share? How successful are they?
• What market do current competitors target? Do they focus on a specific customer type, on serving the mass market, or on a particular niche?
• Are competing businesses growing or scaling back their operations? Why? What does that mean for your business?
• How will your company be different from the competition? What competitor weaknesses can you exploit? What competitor strengths will you need to overcome to be successful?
• What will you do if competitors drop out of the marketplace? What will you do to take advantage of the opportunity?
• What will you do if new competitors enter the marketplace? How will you react to and overcome new challenges?

The Competitive Analysis section for our cycling rental business could start something like this:

Primary Competitors

Our nearest and only competition is the bike shops in Harrisonburg, VA. Our next closest competitor is located over 100 miles away.

The in-town bike shops will be strong competitors. They are established businesses with excellent reputations. On the other hand, they offer inferior-quality equipment and their location is significantly less convenient.

Secondary Competitors

We do not plan to sell bicycles for at least the first two years of operation. However, sellers of new equipment do indirectly compete with our business since a customer who buys equipment no longer needs to rent equipment.

Later, when we add new equipment sales to our operation, we will face competition from online retailers. We will compete with new equipment retailers through personalized service and targeted marketing to our existing customer base, especially through online initiatives.

Opportunities

• By offering mid- to high-end quality equipment, we provide customers the opportunity to "try out" bikes they may wish to purchase at a later date, providing additional incentive (besides cost savings) to use our service.
• Offering drive-up, express rental return services will be seen as a much more attractive option compared with the hassle of renting bikes in Harrisonburg and transporting them to intended take-off points for rides.
• Online initiatives like online renewals and online reservations enhances customer convenience and positions us as a cutting-edge supplier in a market largely populated, especially in the cycling segment, by customers who tend to be early technology adapters.
• Renting bikes and cycling equipment may be perceived by some of our target market as a commodity transaction. If we do not differentiate ourselves in terms of quality, convenience, and service, we could face additional competition from other entrants to the market.
• One of the bike shops in Harrisonburg is a subsidiary of a larger corporation with significant financial assets. If we, as hoped, carve out a significant market share, the corporation may use those assets to increase service, improve equipment quality, or cut prices.

While your business plan is primarily intended to convince  you  that your business makes sense, keep in mind most investors look closely at your competitive analysis. A common mistake made by entrepreneurs is assuming they will simply "do it better" than any competition.

Experienced businesspeople know you will face stiff competition: showing you understand your competition, understand your strengths and weaknesses relative to that competition, and that you understand you will have to adapt and change based on that competition is critical.

And, even if you do not ever plan to seek financing or bring in investors, you absolutely must know your competition.

The Competitive Analysis section helps you answer the "Against whom?" question.

The next step in creating your business plan is to develop an Operations Plan that will serve your customers, keep your operating costs in line, and ensure profitability . Your ops plan should detail strategies for managing, staffing, manufacturing, fulfillment, inventory--all the stuff involved in operating your business on a day-to-day basis.

Fortunately, most entrepreneurs have a better handle on their operations plan than on any other aspect of their business. After all, while it may not seem natural to analyze your market or your competition, most budding entrepreneurs tend to spend a lot of time thinking about how they will  run  their businesses.

Your goal is to answer the following key questions:

• What facilities, equipment, and supplies do you need?
• What is your organizational structure? Who is responsible for which aspects of the business?
• Is research and development required, either during start up or as an ongoing operation? If so, how will you accomplish this task?
• What are your initial staffing needs? When and how will you add staff?
• How will you establish business relationships with vendors and suppliers? How will those relationships impact your day-to-day operations?
• How will your operations change as the company grows? What steps will you take to cut costs if the company initially does not perform up to expectations?

Operations plans should be highly specific to your industry, your market sector, and your customers. Instead of providing an example like I've done with other sections, use the following to determine the key areas your plan should address:

Location and Facility Management

In terms of location, describe:

• Zoning requirements
• The type of building you need
• The space you need
• Power and utility requirements
• Access: Customers, suppliers, shipping, etc.
• Specialized construction or renovations
• Interior and exterior remodeling and preparation

Daily Operations

• Production methods
• Service methods
• Inventory control
• Sales and customer service
• Receiving and Delivery
• Maintenance, cleaning, and re-stocking
• Licenses and permits
• Environmental or health regulations
• Patents, trademarks, and copyrights

Personnel Requirements

• Typical staffing
• Breakdown of skills required
• Recruiting and retention
• Policies and procedures
• Pay structures
• Anticipated inventory levels
• Turnover rate
• Seasonal fluctuations in demand
• Major suppliers
• Back-up suppliers and contingency plans
• Credit and payment policies

Sound like a lot? It can be, but not all of the above needs to be in your business plan.

You should think through and create a detailed plan for each category, but you won't need to share the results with the people who read your business plan

Working through each issue and developing concrete operations plans helps you in two major ways:

• If you don't plan to seek financing or outside capital, you can still take advantage of creating a comprehensive plan that addresses all of your operational needs.
• If you do seek financing or outside capital, you may not include all the detail in your business plan--but you will have answers to any operations questions at your fingertips.

Think of Operations as the "implementation" section of your business plan. What do you need to do? How will you get it done? Then create an overview of that plan to make sure your milestones and timeline make sense.

That way the operations section answers the "How?" question.

Many investors and lenders feel the quality and experience of the management team is one of the most important factors used to evaluate the potential of a new business.

But putting work into the Management Team section will not only benefit people who may read your plan. It will also help  you  evaluate the skills, experiences, and resources your management team will need . Addressing your company's needs during implementation will make a major impact on your chances for success.

• Who are the key leaders? (If actual people have not been identified, describe the type of people needed.) What are their experiences, educational backgrounds, and skills?
• Do your key leaders have industry experience? If not, what experience do they bring to the business that is applicable?
• What duties will each position perform? (Creating an organization chart might be helpful.) What authority is granted to and what responsibilities are expected in each position?
• What salary levels will be required to attract qualified candidates for each position? What is the salary structure for the company, by position?

The Management Team section for our cycling rental business could start something like this:

Jim Rouleur, Owner and Manager

Joe has over 20 years experience in the cycling business. He served for 10 years as a product manager for Acme Bikes. After that he was the operations manager of Single Track Cycles, a full-service bike shop located in Bend, Oregon. He has an undergraduate degree in marketing from Duke University and an MBA from Virginia Commonwealth University. (A complete resume for Mr. Rouleur can be found in the Appendix.)

Mary Gearset, Assistant Manager

Mary was the 2009 U.S. Mountain Biking National Champion. She worked in product development for High Tec frames, creating custom frames and frame modifications for professional cyclists. She also has extensive customer service and sales experience, having worked for four years as the online manager of Pro Parts Unlimited, an online retailer of high-end cycling equipment and accessories.

In some instances you may also wish to describe your staffing plans.

For example, if you manufacture a product or provide a service and will hire a key skilled employee, describe that employee's credentials. Otherwise, include staffing plans in the Operations section.

One key note: Don't be tempted to add a "name" to your management team in hopes of attracting investors. Celebrity management team members may attract the attention of your readers, but experienced lenders and investors will immediately ask what role that person will actually play in the running of the business--and in most cases those individuals won't play any meaningful role.

If you don't have a lot of experience--but are willing to work hard to overcome that lack of experience--don't be tempted to include people in your plan who will not actually work in the business.

If you can't survive without help, that's okay. In fact, that's expected; no one does anything worthwhile on their own. Just make plans to get help from the  right  people.

Finally, when you create your Management section, focus on credentials but pay extra attention to what each person actually will  do . Experience and reputation are great, but action is everything.

That way your Management section will answer the "Who is in charge?" question.

Numbers tell the story. Bottom line results indicate the success or failure of any business.

Financial projections and estimates help entrepreneurs, lenders, and investors or lenders objectively evaluate a company's potential for success. If a business seeks outside funding, providing comprehensive financial reports and analysis is critical.

But most important, financial projections tell you whether your business has a chance of being viable--and if not let you know you have more work to do.

Most business plans include at least five basic reports or projections:

• Balance Sheet: Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
• Income Statement: Also called a Profit and Loss statement, this report lists projected revenue and expenses. It shows whether a company will be profitable during a given time period.
• Cash Flow Statement: A projection of cash receipts and expense payments. It shows how and when cash will flow through the business; without cash, payments (including salaries) cannot be made.
• Operating Budget: A detailed breakdown of income and expenses; provides a guide for how the company will operate from a "dollars" point of view.
• Break-Even Analysis: A projection of the revenue required to cover all fixed and variable expenses. Shows when, under specific conditions, a business can expect to become profitable.

It's easy to find examples of all of the above. Even the most basic accounting software packages include templates and samples. You can also find templates in Excel and Google Docs. (A quick search like "google docs profit and loss statement" yields plenty of examples.)

Or you can work with an accountant to create the necessary financial projections and documents. Certainly feel free to do so, but first play around with the reports yourself. While you don't need to be an accountant to run a business, you do need to understand your numbers, and the best way to understand your numbers is usually to actually work with your numbers.

But ultimately the tools you use to develop your numbers are not as important as whether those numbers are as accurate as possible--and whether those numbers help you decide whether to take the next step and put your business plan into action.

Then Financial Analysis can help you answer the most important business question: "Can we make a profit?"

Some business plans include less essential but potentially important information in an Appendix section. You may decide to include, as backup or additional information:

• Resumes of key leaders
• Additional descriptions of products and services
• Legal agreements
• Organizational charts
• Examples of marketing and advertising collateral
• Photographs of potential facilities, products, etc.
• Backup for market research or competitive analysis
• Additional financial documents or projections

Keep in mind creating an Appendix is usually only necessary if you're seeking financing or hoping to bring in partners or investors. Initially the people reading your business plan don't wish to plow through reams and reams of charts, numbers, and backup information. If one does want to dig deeper, fine--he or she can check out the documents in the Appendix.

That way your business plan can share your story clearly and concisely.

Otherwise, since you created your business plan, you should already have the backup.

Tying It All Together

While you may use your business plan to attract investors, partners, suppliers, etc., never forget that the goal of your business plan is to convince  you  that your idea makes sense. 

Because ultimately it's your time, your money, and your effort on the line.

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A Detailed Guide to Writing a Business Plan

A business plan is a comprehensive document that explains what a business will do, how and what the goals are. All entrepreneurs  should write a business plan before they get started. Why? There are several key reasons.  

Why You Need a Business Plan  

• First and foremost, the process of creating a business plan gives an entrepreneur the opportunity to think through every aspect of their business and make sure that their time, energy and money will be well invested in bringing their idea into fruition.  
• When you’ve got past this stage and are in the process of launching your business , you will be incredibly busy. Every day you’ll be faced with myriad important decisions and challenges to surmount.  Your business plan will provide a valuable road map to support you through that difficult first part of the journey.  
• You will need to convince others that your idea is a good one . Those people may include potential business partners, skilled employees you’re hoping to work with and critically, investors. Your business plan should prove to them that your company will be successful . 

How to Write  Your  Business Plan  

A business plan is not a sales tool or the place for elaborate marketing copy. It needs to convince readers that the business is viable, but through objective facts and logic rather than hyperbole.  

When writing your business plan think about the intended audience. Just as you would tailor your CV and cover letter before applying to a particular job, you might want to consider tailoring aspects of your business plan to appeal to readers with different priorities . It is important to know your audience and play to their needs. 

A Business Plan Appealing to Investors   

When investors review a business plan they won’t just be considering if they should invest, but also when and how they could exit the business.  Your business plan should include financial projections that make it clear when the business will become profitable . Similarly, if your ultimate goal includes going public, buying out investors or selling the company, this should be included.  

Additionally, investors are typically more interested in market-driven businesses than technology-driven ones. For a greater chance of receiving investment, make sure you include an in-depth analysis of the existing and potential markets for your idea.  

A Step  b y Step Guide to  Writing  Your  Business Plan  

The following steps will take you through the process of putting together your business plan, while helping you to understand if and how your idea could become a profitable business.  

1. Executive Summary   

The first section of your business plan is the executive summary. Think of this as the hook. It’s your chance to infect the reader with excitement about what you have to offer. The executive summary should include only the most pertinent information from each of the sections that follow . You should explain in brief: 

• What your business will do and how. 
• The market for your idea. 
• What the growth potential is. 
• What you need to make it happen (if you are applying for funding). 

2. Business Overview  

This section should include  an overview of your business, including a description of your brand, values and mission . You should answer the following questions: 

• What will your company do? 
• How will you deliver it? 
• Why is there a need for your product or service? 
• What does your brand stand for? 
• Who are your customers? 
• How will you reach them? 
• What have you done so far? For example, have you got a website or any social media channels? Have you started trading? 
• How will your company be structured? 
• Do you have any existing partners or shareholders and if so, what is their stake in the business?  

3. Market Research  

The aim here is to demonstrate that a market exists for your idea. To do this you need to include data on the size of the market, explain relevant trends within the market, and show where your business fits within that landscape . Some key elements to include are: 

• The size of the overall market for your product or service. 
• The size of any niches within the market. 
• Where your business fits. 
• Whether the market is stable or growing. 
• Whether it is a new or mature market. 
• What trends exist and what drives them. 

4. Competitor Analysis  

Knowing who you are up against is essential to winning any competition. And understanding other companies operating in the same space can help you to refine your approach. What’s more, demonstrating to potential investors that you are familiar with the competition and can clearly differentiate your offering will help them to feel confident that you and your business are a good investment.  

This section should include who your biggest competitors are, what they offer and their strengths and weaknesses . Don’t just think about existing players. If your idea is addressing a gap in the market, other entrepreneurs like you may have also recognized the opportunity. Anticipating new competition and explaining how you will respond will prepare you for success when this does eventually happen.  

You should also take note of what others are charging for similar products or services. This information will give you an idea of what customers are happy to pay and what the range is. Your pricing strategy should take into account your  brand positioning , as well as customer perception of what constitutes value for money, and how much quality costs. 

5. Customer Research   

What you include in this section will depend on the stage you are at. If you are already trading and have existing customers, how have they responded to your product? Is your audience growing? Alternatively, have you created a prototype and engaged with potential customers to see their reactions? Have you conducted focus groups to explain your idea and discover if there is appetite for it?  

Whatever your method, this section needs to demonstrate that you have done the research and proven there is demand for the business you want to create.  Understanding your customer will also give you a clear idea of the size of your audience, which will in turn inform your sales forecast . 

Interacting with potential customers also offers a vital opportunity for you to refine your offering. Feedback from focus groups and one-on-one conversations could give you the insights needed to make tweaks that will improve your chances of success. Be prepared to discover and respond to new opinions and perspectives. Although it can be hard to hear criticism, no matter how well intended, making changes now will make all the difference when it comes to launching your business.  

6. Marketing and Sales Plan  

A strong marketing plan is the difference between success and failure. When you first start, it is important to focus on determining the most effective channels and platforms for reaching leads and converting them into customers . Money spent on marketing needs to bring a return on investment. A smart marketing plan includes targeted testing and a continuous feedback loop to refine and improve your efforts. Rather than taking a scattergun approach and spending a little of your valuable time and money on each channel, pick the most important for your business and concentrate on them.  

The following elements should be included in an effective marketing plan: 

• Detailed customer profiles. Determine who your customers are, what their personal goals and needs are, and use these insights to deduce where you can reach them. Starting with a very targeted approach will ensure your efforts are effective. No matter how universal you may believe your product to be, you won’t be able to use the same language and channels to reach a teenager and a pensioner. Be specific about who you are talking to and how.  
• Which channels will you utilize? It can be tough to know where to start. If you’re not sure, focusing a part of your marketing budget on search engine optimization ( SEO ), pay per click search engine advertising ( PPC ) and email marketing  is a good strategy. These channels have proven to be effective time and again for a broad range of businesses and will reach most customer segments.  
• How will you announce your launch? Are there any opportunities to engage press?  
• Do you have any personal contacts, an existing database or professional network that may be helpful in publicizing your business? 

Your marketing plan should also include a budget and details of how you will measure success.  

7. Operations  

This section covers  all the practical elements that are needed to make your business work . What to include in here depends entirely on the type of business you are establishing. Nonetheless, the following bullet points will help make sure you’ve considered all the operational requirements for your company: 

• Who are you and why are you starting this business? Before explaining your company structure and describing your team, it is a good idea to describe yourself, your skills and your motivation. Startup investors are often interested in the people behind the idea as much as the idea itself.  
• Do you have any employees? Will you be employing anyone in the near future? Here you need to account for salaries you will be responsible for, as well as demonstrating you have the skills you need on board to achieve success. However, don’t go overboard. More salaries means greater responsibility and risk. Startup job descriptions are often very broad for this reason. 
• If you’ve never started a business before, showing you have experts to hand who can support you, whether as board members, mentors or co-founders, will reassure investors and others.  
• Do you have, or will you need, a physical space? Whether an office or a shop front, you should explain what, why, where and how much it will cost to acquire and maintain. If location is important to your success, for example if you are opening a restaurant, you need to explain why you have chosen the location and include an analysis of similar businesses in the area.  
• Do you have, or will you need, any suppliers or partners? Include a list and explain how they are connected to the business. 
• A risk assessment is a vital part of the puzzle. Take this opportunity to think through any challenges that could prevent your business from operating. How would you overcome them and what will you to do mitigate the risk of them happening? For example, if you are sourcing materials from another country, what happens if borders are closed and the product cannot be shipped? 
• Are there any legal considerations or regulations you need to adhere to? You should also include details of your insurance policy.  
• Have you acquired, or are you in the process of acquiring, a trademark, copyright or patent? Include the status of your application if relevant.  

8. Financials   

Your business plan needs to include detailed financial information that shows the current financial state of the company, what it will cost to run your business, what income you expect to make, and when you predict the company will start generating profit .  

It is imperative that the financial information you include is thorough and detailed, especially if you are seeking investment. You need to know your numbers and be able to answer questions about them. If you don’t feel you have the expertise to do this well, you should either work with an accountant to produce the documents you need, or seek a partner who has the skills to take care of this side of the business.  

The following documents should be included in this section: 

• Balance sheet. This will show the current financial state of the company. Have you ordered any stock or committed to paying rent, for example? 
• Income statement. This projects the expected income and expenditure for a specific period. 
• Cash flow. This shows how cash flows through the business and ensures that key payments, such as salaries, will be able to be paid. 
• Operating budget. How much will your business cost to run? This will include everything from salaries to utility bills.  
• Break-even analysis. As the name suggests this will determine how long it will take for your business to become profitable.  

When projecting income for the years ahead make sure that you have taken market readiness into account. If you are launching a particularly innovative product or are entering a slow-moving market, the rate of sales may be slower. This should be accounted for in your business plan as it will have a significant impact on the overall financial health of your business.  

Where To Begin When Building a Business  

There is a lot to consider when launching your own company. However, anyone can do it, it just takes patience, dedication and willingness to learn. There are plenty of helpful templates available on the internet, particularly for some of the financial documents you will need to include, which will help you get started.  

If you have an idea and would like to learn from experienced entrepreneurs how to take it to market,  explore the business programs  we have on offer at EU Business School. Our faculty are working professionals who draw on their own experiences to equip students with the skills, knowledge and mindset needed to succeed. What’s more, our global community of over 27,000 alumni are eager to support students by sharing their skills and expertise.  

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How to write a business plan as a start-up.

There are no right or wrong ways to start a business.

Different companies spring to life along different pathways, and business owners must always play to their own strengths in terms of business development. But no matter what type of business you’d like to start, it always pays to have a comprehensive business plan in place.

According to research published in the Strategic Entrepreneurship Journal , businesses with a formal, written business plan are actually 16% more likely to succeed than those without a business plan – and with 50% of all UK start-ups failing within five years , entrepreneurs certainly need all the help they can get.

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That’s why we’ve written a comprehensive guide to writing an ironclad business plan that will maximise your chances of success.

What is a business plan?

If you’re working on your first-ever business venture, the concept of a business plan might be totally foreign to you. Don’t worry, because they’re actually pretty straightforward.

A business plan is essentially just a written document that describes everything there is to know about your business. It covers everything from objectives and strategy, to your products, marketing plan, logistics and projected finances. Just think of your business plan as the blueprint for how you want your finished company to look and operate.

It should essentially weave together a great narrative outlining where your business is coming from and where you’d like it to go.

Why is a business plan important?

On the one hand, a business plan is important for your sanity. By writing down everything you know about your proposed business, you’ll be able to get a much better feel for your start-up and what sort of expectations you should be setting.

The writing process also affords you the opportunity to hone in on your idea, set benchmark goals and come up with different ways to measure your progress and success. Above all else, reviewing your plan will enable you to spot potential oversights or mistakes you’ve made during your initial planning stages. On the other hand, writing a business plan has crucial, external impacts on your business development, too.

If you need funding to get your start-up off the ground, investors or creditors will almost always request to see your business plan before they’re willing to extend your funding. To gain a small business loan , for example, government agencies or high street banks will want to know that your business has a clear direction. You must demonstrate exactly how a proposed loan will fit into your business plan, show how every single penny will be spent and prove there will be some return on investment.

The easiest way to illustrate all of these points will be to present a loan manager or seed investor with a watertight business plan.

What should I include in my business plan?

Business plans aren’t a legal requirement for companies in the UK, and so there aren’t any set rules on what your business plan should or should not include. That being said, there are several key items that your business plan absolutely must include in order to demonstrate your company’s overall viability.

First and foremost, your business plan needs to include a quick pitch…

Executive summary

You should start your business plan with an executive summary that clearly and concisely outlines everything a reader can expect to find inside your business plan – and that executive summary should never exceed two pages of text. You should also include an elevator pitch alongside your executive summary that could adequately sell your business to investors in just a couple of paragraphs.

This is because the people looking at your business plan will often be incredibly busy, and might not have time to look at your entire business plan right when you hand it to them.

If you don’t give your reader something short and sweet to lure them in and make them want to read more, your business plan might simply be forgotten. Because the executive summary is essentially a recap of everything else in your business plan, it’s normally the last thing you’ll write.

You should also include a short ‘about me’ section.

By talking about your background, experience and motivation for starting a new business, you’ll be able to humanise your start-up. This will show potential investors that real people are at the heart of your company and how it will operate.

Products and services

Next, you’ll need to outline precisely what it is your business is going to do. Are you going to sell products, offer services or do both? Go into some detail about what you’re planning to offer and why. Tell the reader how much you plan on charging customers for those goods or services.

Remember: in terms of pricing, the amount of money you charge customers must exceed that item’s production cost, and must also include enough to cover some of the overheads you will need to pay in order to keep your business up-and-running.

The customers

Most business plans include details about customers, too.

You should generally devote a section of your business plan towards identifying exactly who it is you think will buy your company’s products or services. For example, what age group or demographics do you anticipate will be more likely to become one of your customers?

More important still, you need to outline why those individuals would be likely to buy your goods or services – citing real and current statistics, studies and anecdotes. That feeds into a wider section on market research.

Nobody will offer funding to your business unless you can prove to them you’ve done your homework. So, you need to conduct both primary and secondary market research about your competitors, consumer base, industry trends, logistics and anything else you think might be helpful.

In terms of what types of research should be going directly into your business plan, you should always include a section on your competitors.

For reference, a competitor is any sort of business that offers a product or service that will be similar to what it is you’d like to sell. As a brand-new start-up, chances are you’ll have lots and lots of competitors – so, start local and work your way up.

Find out what businesses are operating in your local area, what they offer to customers and how your goods or services are going to be different. One of the easiest ways to organise your thoughts on competition and how your business will be able to survive it is to produce a Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis. That will show bank managers or potential investors that you’ve got very real expectations in terms of your ability to outperform competitors in the market.

Another crucial aspect of your business plan will be to spell out the A-Z logistics of how your business is expected to operate on a daily basis. That means explaining how you’ll create products or offer services, how customers will receive what they’ve paid for, who will get paid and how and everything in between.

You should also add in a broad marketing plan outlining how you’ll promote your company to reach customers.

A lot of these titbits will seem trivial or banal, but include everything you can possibly think of. The more details you include, the more it will demonstrate your professionalism.

You’ve also got to include a section in your business plan about how much money your company is going to make. To secure funding, you’ll need to adequately explain and rationalise your income expectations so that you can demonstrate a positive return on investment (ROI). The best way to do that is to add in a cash flow forecast.

A cash flow forecast estimates the amount of money you are expecting your business to bring in and pay out over a specific period of time.

How far in advance you choose to forecast is totally up to you, but certain business loan or grant schemes that you might want to apply for could have specific requirements. For example, the UK Government’s Start Up Loans scheme requires a minimum 12-month cash flow forecast.

To create a cash flow forecast, you’ll need to record:

Your revenue:  This is all the money that will come into your business from sales, equity or other investments. Most revenue sections include around three-to-six items. By adding all these items together, you’ll get your company’s total income.

Your expenses:  This is all of the money that you know you’ll need to spend in order to run your business. Examples might include property rental, local authority business rates, insurance, staff wages, supplier costs, marketing and advertisements – literally anything you can think of. You’ll also need to think about less regular expenses like VAT payments , which are due every quarter rather than monthly. By adding all of these items, you’ll get your company’s total expenses.

Net cash flow:  This is the final section of your cash flow statement. You can find it by subtracting your total expenses from your total income. If this figure turns out to be negative, it means you’re expecting your expenses to be greater than your revenue across that period. If the figure is positive, it means you’re expecting to make a profit.

If you’d like a head-start, the Start Up Loans Company has an easy-to-use cash flow statement tool that you can download online for free.

Finally, most good business plans include some form of back-up plan. Nobody wants to contemplate a future in which their business plan fails, but it happens. By showing a bank or that you’ve planned for a range of ‘what if’ scenarios, like your cash drying up or a new competitor moving in across the street, you’ll prove that you’re ready for any outcome. That makes your business look stronger, and it prepares you to weather any storm.

How do I structure my business plan?

Once you’ve figured out all the items you want to include in your business plan, it’s time to think about how you’d like to structure it and get to work writing.

Just like deciding what to add in versus what to leave out, how you structure your business plan is totally up to you. There aren’t any set rules. That being said, the vast majority of business plans are structured as follows:

• Executive summary and elevator pitch
• Your products or services
• Your market and customers
• Market research
• Marketing strategy
• Competitor analysis
• Operations and logistics
• Cost pricing and strategy
• Financial forecasts
• Your back-up plan

You don’t necessarily need to have 11 sections in your business plan. You can combine certain bits together that seem related, and you can create totally different sections unique to your business that not every company would need to include. But this is the most popular running order used by UK businesses.

If you need a bit more guidance on how to structure your thoughts or develop each section of your business plan, there are loads of organisations that offer basic business plan templates online. The UK Government’s  business plan resources and templates are a good starting point.

The bottom line

Developing your company’s business plan might seem like a dull administrative exercise – but it doesn’t need to be difficult, and it’s actually pretty exciting.

Your finished business plan is effectively a concrete blueprint for your company’s future. It tells the story of where your idea came from, how you plan to achieve your goals and what’s going to happen when you do.

Your business plan is where it all begins, and it’s how you can finally start transforming your career dreams into a reality.

Author:  John Carpenter

John is Chief of Staff at 1st Formations and statutory director of the BSQ Group, responsible for assisting the CEO, HR, recruitment and content proofreading. He has an MSc in Digital Marketing Leadership from the University of Aberdeen and certificates in Anti Money Laundering, and Company Secretarial Practice and Share Registration Practice. John was previously operations director at a Mayfair-based law firm.

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How to create an effective business plan in 2023.

Professional Bio Templates & Examples

The mere thought of putting a business plan together can send even the most enthusiastic entrepreneur into a tailspin, but writing one can help you work out whether you actually have a viable business idea on your hands.

First and foremost, the person who must be convinced by your business plan is you. After all, if you’re not persuaded by it, why should anyone else be?

Once you’re sold on the basics, you can use your business plan to convince potential sources of finance, investors, partners, and employees that you’re the real deal.

This jargon-free article will give you a better idea of how to get the ball rolling.

Executive summary

The executive summary highlights and emphasises the main points of your business. No more than a page in length, the executive summary needs to be succinct, compelling, and engaging - you want the reader / potential investor to be interested enough to read on and, even better, buy into your business.

This section should help the reader understand the purpose and passion behind your business. You’ll need to include brief outlines of:

• Your business name and location
• A short, simple summary of your business concept
• When were you founded?
• A description of your business’ competitive advantages
• Proof that there’s a market for your product or service
• A summary of the management team you’ve assembled
• A brief description of at what stage of development your business is in
• What is your background and experience, if any?
• What was your decision making process?
• When did the initial idea occur?
• Where will the business operate?
• How long is the lease, if you have one?
• Why - the mission statement of your business

You’ll be elaborating on most of these themes throughout the document, so keep it fairly succinct. Revisit the content once you’ve finished the rest of the business plan - you might find better ways to express your ideas.

Products and services

This is your opportunity to really wax lyrical about the core aspect of your business: what you’re going to be selling. You want complete belief from the reader that your product is the best out there, and for them to see why they should invest.

Here’s what you need to include:

• What is your product or service?
• Why should customers purchase from you?
• How do you aim to sell your product or service?
• How are your products manufactured?
• Do you have any exclusive deals or partnerships?
• What is your pricing strategy?
• What problems, if any, do you see with your product or service? What are the benefits to the customer?
• How will the product be sold - online or retail?
• What makes your product or service stand out?

Management team

Your business plan needs to detail specifically who is involved in your business.

You want this particular section of your business plan to highlight that you have a more-than-capable team running your business, a team that will use their expertises to make the business work and profit.

Make a list or tree diagram of people's responsibilities, and attach CVs as appendices if you feel this supports your choices.

You’ll need to include:

• Who owns the business?
• Who are the directors and shareholders?
• Who will be involved in the day-to-day running of the business?
• What experience do these people have and how will this benefit the business?
• Who is your management team?
• What experience do they have?
• Who has direct reports?
• Do you have any vacancies yet to be filled?
• What is your recruitment process?

The marketing section is key in showing a potential investor that you know how you will bring in custom. It needs to show you’ve thought about how to get people interested in your business, and what makes it different from competitors in your market or area.

How you promote your business will differ depending on how you’ll make sales. If you’re opening a shop you’ll need to employ some local marketing techniques (think print adverts, flyers, broadcast media etc.) but if you’ll be selling online you should consider search marketing and social media promotion.

What to include can be broken down into four sections - the four P’s:

Who are you aiming your product at? Who is your target market? For example, “22-34, London based, interested in photography and male”.

What is the price of your product/service? How did you arrive at this price point?

How does this compare with other products in your market? What budget have you set aside for marketing?

How and where are you going to distribute your product/service? Retail, wholesale or online? For e-commerce, you’ll need to show you can drive traffic to your website, and with retail you’ll need to show you understand the importance of putting your product in the right shop/area.

‍ Promotion

How are you going to promote your business? How and where will you advertise?

Think about the methods mentioned in the opening paragraph - will any of these help get your business noticed?

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The operations section of your business plan deep-dives into the logistical side of your idea. It highlights that you have thought concisely about the day-to-day running of your business. It needs to highlight and set clear expectations of exactly how your business will operate.

Make sure to include details of the following:

Now is the time to be more specific about where you are based. Are there any works that need carrying out? Is there adequate parking? What licence do you need (if any)? Is there scope for you to develop a hybrid working space - could this suit your goals and how would it function?

Facilities and utilities

Does your location have internet access? Who will supply your water, gas and electricity?

How will you store and track your assets, stock, equipment?

What are your hours of trading? Are these flexible?

What payment systems will you have in place? Do you accept AmEx or contactless?

Do you need to invoice clients?

How many members of staff will you need? What will their duties be?

What is the customer journey? What is your refund policy? How will customer complaints be handled?

Financial Plan

A financial plan helps a potential investor think about whether they are likely to get a healthy return on investment (ROI). For this reason, it’s likely to be the most scrutinised section of your business plan.

If your business is brand new, think about how you’ll show predicted earnings - or you might want to outline any plans to scale up, including any intentions you have to access help in the form of an unsecured loan to grow your business . You could even look at a company similar to yours and what their earnings have been to compare.

You’ll also need to include details of the following:

Profit and loss.

Also known as an income statement, the profit and loss statement measures just that: the profit and loss of your business over a specific period. This takes information from the following equation:

Revenue - Cost of goods - Expenses = Net

Cashflow shows how much money is going in and out of your business. Think of cashflow as money management. Much like your personal finances, you need money coming in before you can take money out. If you spend money you don’t have coming in, this will amount to debt - this isn’t something an investor will look favourably upon.

Balance sheets

Compiled on an annual basis, the balance sheet gives a picture of the financial state of your business. Include assets, liabilities, and equity (see glossary on next page).

Sales forecast

Forecasting shows the depth of knowledge of your business. Break this section down into manageable parts, showing estimated sales by month over 12 months, then each year over five years. As with profit and loss, it’s important to be realistic, otherwise you will lose credibility.

Glossary of terms

Unsure of the difference between cash-flow and capital? While we do our best to avoid jargon, it’s important to understand the terminology when starting a business. To help you write your business plan, we’ve compiled a glossary of the most-used business terms and have provided easy-to-understand definitions.

An item owned by a business that has monetary value, for example, property, cash in the bank or inventory.

Lists the assets, liabilities, and equity of a business in order to calculate net worth.

An organisation that trades in goods or services.

Wealth owned by a person or business that is available for reinvestment in the company.

The amount of money being transferred in and out of a business.

A person who runs a limited company, often owning shares in the company.

A person who works for wages or salary in a business.

A person who employs people and pays them a wage or salary.

The value of the shares issued by a company.

Financial forecasts

A calculated estimation of future financial outcomes for a business.

A business licence granted by a company that enables a party (franchise) to market its products or services. For example, Ben and Jerry’s is the company, and the parlours where you buy the ice-cream are a franchise.

The items or stock owned by a business.

A person who invests money or capital into a business with an expectation of future financial return.

A company’s legal debts, for example, loans, mortgages or accounts payable.

Limited company

An organisation set up to run a business, which is responsible for everything it does. Finances are separate from personal finances, and Directors are responsible for decisions which affect the company.

Total assets of a business minus total liabilities. Determines the value of a company, for example, a business has £50,000 in cash, £200,000 of inventory and £20,000 in savings = £270,000 in assets. The business also has a £100,000 mortgage and £10,000 credit card debt (liabilities). Therefore the total net worth is £160,000.

An account showing a businesses net profit and loss over a given time frame.

Prediction of future sales.

Shareholder

A person who owns shares in a company or business, whose rights are often governed by a Shareholders’ Agreement.

A portion of the company’s ownership divided amongst shareholders, giving the owner a proportion of the company.

Sole trader

A person who is exclusively the owner of a business and solely responsible for all profits and losses of that business.

A new business.

Target market

A group of consumers at which a product is aimed. For example, sweets are often aimed at a target market of small children.

Umbrella company

A company that acts as an employer to agency contractors and processes their payments.

Keeping track of your accounting & finances

Ensuring you have a great accounting and financial plan is essential. Using a simple to navigate accounting system can be a perfect option. Why not consider using Crunch’s software ? Not only is it easy to use, but it also comes with support from our experts who can guide you through your accounting tasks and tracking your finances. We also have a ton of Crunch integrations , providing our clients with even more tools to run their businesses efficiently. For example, our integration with financial forecasting software Brixx allows you to project your business's financial future so you can test scenarios and be prepared for any eventuality. This is also a great tool to have when preparing your business plan.

We're comitted to helping new businesses thrive, and to encourage this we've shared lots of free resources - from in-depth business guides to blank invoice templates , we're here to help you succeed. To find more ways that Crunch can help make running your business effortless, join us online for 14 days completely free, or get in touch with our friendly advisors at a time that suits you. Alternatively, read our complete free guide to writing a business plan for lots of in-depth, interesting insights and considerations.

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What Is a Business Plan?

Understanding business plans, how to write a business plan, common elements of a business plan, the bottom line, business plan: what it is, what's included, and how to write one.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

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• How to Start a Successful Dropshipping Business: A Comprehensive Guide

A business plan is a document that outlines a company's goals and the strategies to achieve them. It's valuable for both startups and established companies. For startups, a well-crafted business plan is crucial for attracting potential lenders and investors. Established businesses use business plans to stay on track and aligned with their growth objectives. This article will explain the key components of an effective business plan and guidance on how to write one.

Key Takeaways

• A business plan is a document detailing a company's business activities and strategies for achieving its goals.
• Startup companies use business plans to launch their venture and to attract outside investors.
• For established companies, a business plan helps keep the executive team focused on short- and long-term objectives.
• There's no single required format for a business plan, but certain key elements are essential for most companies.

Investopedia / Ryan Oakley

Any new business should have a business plan in place before beginning operations. Banks and venture capital firms often want to see a business plan before considering making a loan or providing capital to new businesses.

Even if a company doesn't need additional funding, having a business plan helps it stay focused on its goals. Research from the University of Oregon shows that businesses with a plan are significantly more likely to secure funding than those without one. Moreover, companies with a business plan grow 30% faster than those that don't plan. According to a Harvard Business Review article, entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don't.

A business plan should ideally be reviewed and updated periodically to reflect achieved goals or changes in direction. An established business moving in a new direction might even create an entirely new plan.

There are numerous benefits to creating (and sticking to) a well-conceived business plan. It allows for careful consideration of ideas before significant investment, highlights potential obstacles to success, and provides a tool for seeking objective feedback from trusted outsiders. A business plan may also help ensure that a company’s executive team remains aligned on strategic action items and priorities.

While business plans vary widely, even among competitors in the same industry, they often share basic elements detailed below.

A well-crafted business plan is essential for attracting investors and guiding a company's strategic growth. It should address market needs and investor requirements and provide clear financial projections.

While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.

Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.

The length of a business plan can vary greatly from business to business. Regardless, gathering the basic information into a 15- to 25-page document is best. Any additional crucial elements, such as patent applications, can be referenced in the main document and included as appendices.

Common elements in many business plans include:

• Executive summary : This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
• Products and services : Describe the products and services the company offers or plans to introduce. Include details on pricing, product lifespan, and unique consumer benefits. Mention production and manufacturing processes, relevant patents , proprietary technology , and research and development (R&D) information.
• Market analysis : Explain the current state of the industry and the competition. Detail where the company fits in, the types of customers it plans to target, and how it plans to capture market share from competitors.
• Marketing strategy : Outline the company's plans to attract and retain customers, including anticipated advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers.
• Financial plans and projections : Established businesses should include financial statements, balance sheets, and other relevant financial information. New businesses should provide financial targets and estimates for the first few years. This section may also include any funding requests.

Investors want to see a clear exit strategy, expected returns, and a timeline for cashing out. It's likely a good idea to provide five-year profitability forecasts and realistic financial estimates.

2 Types of Business Plans

Business plans can vary in format, often categorized into traditional and lean startup plans. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.

• Traditional business plans : These are detailed and lengthy, requiring more effort to create but offering comprehensive information that can be persuasive to potential investors.
• Lean startup business plans : These are concise, sometimes just one page, and focus on key elements. While they save time, companies should be ready to provide additional details if requested by investors or lenders.

Why Do Business Plans Fail?

A business plan isn't a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections. Markets and the economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All this calls for building flexibility into your plan, so you can pivot to a new course if needed.

How Often Should a Business Plan Be Updated?

How frequently a business plan needs to be revised will depend on its nature. Updating your business plan is crucial due to changes in external factors (market trends, competition, and regulations) and internal developments (like employee growth and new products). While a well-established business might want to review its plan once a year and make changes if necessary, a new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is ideal for quickly explaining a business, especially for new companies that don't have much information yet. Key sections may include a value proposition , major activities and advantages, resources (staff, intellectual property, and capital), partnerships, customer segments, and revenue sources.

A well-crafted business plan is crucial for any company, whether it's a startup looking for investment or an established business wanting to stay on course. It outlines goals and strategies, boosting a company's chances of securing funding and achieving growth.

As your business and the market change, update your business plan regularly. This keeps it relevant and aligned with your current goals and conditions. Think of your business plan as a living document that evolves with your company, not something carved in stone.

University of Oregon Department of Economics. " Evaluation of the Effectiveness of Business Planning Using Palo Alto's Business Plan Pro ." Eason Ding & Tim Hursey.

Bplans. " Do You Need a Business Plan? Scientific Research Says Yes ."

Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."

Harvard Business Review. " How to Write a Winning Business Plan ."

U.S. Small Business Administration. " Write Your Business Plan ."

SCORE. " When and Why Should You Review Your Business Plan? "

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Home » What Is Business Plan and How To Write It? [Template]

What Is Business Plan and How To Write It? [Template]

July 20, 2021 max 7min read.

This article covers:

What Is a Business Plan?

Who is in charge of writing a business plan.

• How To Write a Business Plan?

What Are the Advantages and Disadvantages of Writing a Business Plan?

• What Is the Skeleton of a Business Plan?

Business Plan Definition

A business plan is a document that outlines the strategies and objectives that a startup or organization wants to achieve and how they plan to achieve them.

A business plan is like a map for starting or growing your company. It lays out the essential details of your business and how you plan to succeed.

Simply put, a business plan is a written copy of the business idea, what financial model it will adopt, the product or service, who will be the target audience, their marketing strategies, etc. It is conducive in the initial stages of establishing your enterprise. 

The business plan is essential for the investment process. A detailed plan is crucial to attract stakeholders , venture capitalists, and investors or angel investors to pitch your business idea. In such a case, your business plan becomes your way of convincing them to invest their resources in your plan because it is worth it. 

The core of a good plan tells the story of your business idea – what problem you’re solving and for whom. Are you hoping to start a bakery downtown? Create a new software tool? The plan explains who your potential customers are and why they’ll love what you offer.

It also includes specifics like who’s on your team, what you’re selling or the service you provide, and how you’ll spread the word (marketing). You’ll want to estimate sales projections and costs so folks understand how you’ll make money. This shows profits down the road.

A big part is differentiating from the competition. What makes your approach unique? Why pick you over similar options? The plan convinces potential backers or partners that you’ve thought it through and have a clear path to profits.

Overall, taking time to craft a solid plan is super helpful in the long term. It guides you through launch and growth. Review it yearly to check if your assumptions are still tracked, or if changes are needed. A plan keeps momentum on your side.

Starting or developing a business plan isn’t a science or learned through a degree. Some companies develop through trial and error, while others are drafted from head to toe. 

Hence, the answer is No if we are talking about a particular person responsible for writing a business plan. Similarly, there is no need for an extended, lengthy business plan to be written with each plan elaborated. 

Irrespective of all this, there are still some conditions in which a business increases its chances of becoming successful by drafting a business plan. Such conditions are as follows: 

• For tech startups, a business plan can be a medium to gain long-term funding, especially with no trading history.
• When the market is new, untested, or volatile, a business plan can come in handy and serve as a document to fall back upon, mainly to tackle uncertainties and unclarity.
• If you have an excellent business idea and haven’t given it much thought or put it on paper, drafting a business plan can be a good option. Writing a business plan can help you carefully structure and evaluate your thoughts from different angles to spot risks.

How To Write a Business Plan? 

First and foremost, when writing a business plan, you need to identify the problem your business will aim to solve and the purpose your business serves. 

Once that is sorted, you need to consider who you are trying to attract with it, what kind of customers, and why. Following are some additional key points to consider while drafting your business plan: 

• Note how you plan to secure your funding through private investors, bank loans, etc.
• Write about your business history, the concept, and what products or services you are trying to sell.
• Ensure you are transparent with your investors and do not keep any information from them. Do not exaggerate or bluff about your experience and skills. Gaining trust is crucial.
• Explain the details about your product or service in layperson’s terms. Avoid jargon as much as possible to avoid confusing the reader.
• Focus on the business’s strengths, the problem it aims to solve, and the evidence you have to prove the same.
• Understanding the market you are penetrating is crucial, as is conducting competitor analysis, knowing who your competitors are, learning about your competitive advantage , and finding your unique selling proposition (USP) .
• Last but not least, ensure your business plan is brief. Instead, keep it as short and precise as possible. Your aim through the business plan is to deliver crucial information so the reader can decide.

It’s quite easier to write a business plan if you consider the given points. However, it’s still not a walk in the park. If you still have trouble drafting your plan, consider hiring a writer—an affordable business plan writer  who can help you put the first version of your plan on paper.

If you are still trying to decide whether or not you should dedicate your time to making a business plan, here are a few advantages and disadvantages of a business plan to help you make this decision. 

Advantages of a Business Plan

• A business plan can be your golden document to secure funding for your business . Initially, funding is crucial, especially for tech and SaaS startups.
• The strategic focus of your business is preserved after the first stage. You can read about scope creep and understand how a company occasionally diverges from its goal, which could lead to stagnancy. In such a case, it is essential to understand the success factors in a business and plan exactly to serve the purpose.
• Having a business plan on paper invites other passionate people on board . When you have a trading history, it is easier to get people on board. However, if you have a plan, it convinces potential investors that you are sure about what you are doing. 

Disadvantages of a Business Plan

• A business plan can hamper you from looking forward. This means you may depend too much on your plan without considering other external factors such as market conditions, trends, etc. Such a dependency can lead you to make mistakes and miss potential golden opportunities just because they were not in the plan.
• Analyzing performance can become time-consuming. A business plan can make you dwell on your past mistakes by focusing on the goals and objectives you could not achieve. Analyzing past performance could save time and resources by focusing on moving forward with strength.
• Constant change makes a business plan outdated as soon as it’s written. We know that the world is changing quickly, so your business plan will likely lose its relevance by the time you are ready to launch. A great alternative to the business plan is a strategic project roadmap . This is because a business plan has a lot of essential details, such as the mission statement , which are less likely to change either way. Moreover, a roadmap can help pave the most adaptable and actionable path.

What Is the Skeleton of a Business Plan? 

Since you are still reading, I am sure you’ll want to know what the skeleton of a business plan looks like. 

Remember that it can be frustrating because critical thinking is involved, and there is no hard-fast rule for a business plan. However, the best approach is to look at other business plan templates and write yours in a way that makes sense to any layman. 

Here is what a Business plan constitutes of: 

• Overview: In this section, you summarize your business concept and its execution.
• Detailed Description: In this section, you will describe the kind of product or service you are offering, what the unique selling point is, and how valuable your business is.
• Target audience: In this section, you will explain your market segmentation , the target market, their essential traits, etc., backed up by user research .
• Marketing strategy: Once you know your target audience well, you must document how you will reach them through a marketing strategy. A marketing strategy is often defined within the marketing plan , where primary establishment and engagement strategies are explained in detail. However, as a subsection in a business plan, it need not be as detailed as a market plan.
• Core team: This section will discuss your people and the team behind the development process. If you don’t have a team yet, you must discuss how team members will be selected, what candidates suit you, and the timeline. This section is critical to procure external investments such as passion and enthusiasm.
• Financial Predictions: Remember that investors are mainly concerned about finances because no one wants to invest in a loss-making company. Hence, your financial sedition is going to be scrutinized a lot more than anything else. Therefore, it is crucial to be thorough with the same. Make sure you talk about how much money you need to get started and how you plan to keep the money rolling in. Ensure that your cash flow forecast is realistic and achievable, which will help keep your business floating for the first few years.

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A business plan consists of the overview of your business idea, detailed descriptions of your product or service and its unique selling proposition, your target audience, your marketing strategy, the core team and how to hire it, and the financial model or predictions.

A business plan helps you pitch your business idea to potential investors and secure funding. When your business is on the brink of losing focus after a few initial years, a business plan helps you to stay on track. Lastly, it invites other potential employees, partners, or investors to invest their resources in your business.

A business plan expires fast because of our constantly evolving world. It is not dependable in the long run because of its ignorance towards changing marketing conditions. It can obstruct you from looking forward to external factors and golden opportunities since it compels you to focus on the plan, creating dependency.

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Goals and Objectives for Business Plan with Examples

Published Nov.05, 2023

Updated Sep.14, 2024

By: Jakub Babkins

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Table of Content

Every business needs a clear vision of what it wants to achieve and how it plans to get there. A business plan is a document that outlines the goals and objectives of a business, as well as the strategies and actions to achieve them. A well-written business plan from business plan specialists can help a business attract investors, secure funding, and guide its growth.

Understanding Business Objectives

Business objectives are S pecific, M easurable, A chievable, R elevant, and T ime-bound (SMART) statements that describe what a business wants to accomplish in a given period. They are derived from the overall vision and mission of the business, and they support its strategic direction.

Business plan objectives can be categorized into different types, depending on their purpose and scope. Some common types of business objectives are:

• Financial objectives
• Operational objectives
• Marketing objectives
• Social objectives

For example, a sample of business goals and objectives for a business plan for a bakery could be:

• To increase its annual revenue by 20% in the next year.
• To reduce its production costs by 10% in the next six months.
• To launch a new product line of gluten-free cakes in the next quarter.
• To improve its customer satisfaction rating by 15% in the next month.

The Significance of Business Objectives

Business objectives are important for several reasons. They help to:

• Clarify and direct the company and stakeholders
• Align the company’s efforts and resources to a common goal
• Motivate and inspire employees to perform better
• Measure and evaluate the company’s progress and performance
• Communicate the company’s value and advantage to customers and the market

For example, by setting a revenue objective, a bakery can focus on increasing its sales and marketing efforts, monitor its sales data and customer feedback, motivate its staff to deliver quality products and service, communicate its unique selling points and benefits to its customers, and adjust its pricing and product mix according to market demand.

Advantages of Outlining Business Objectives

Outlining business objectives is a crucial step in creating a business plan. It serves as a roadmap for the company’s growth and development. Outlining business objectives has several advantages, such as:

• Clarifies the company’s vision, direction, scope, and boundaries
• Break down the company’s goals into smaller tasks and milestones
• Assigns roles and responsibilities and delegates tasks
• Establishes standards and criteria for success and performance
• Anticipates risks and challenges and devises contingency plans

For example, by outlining its business objective for increasing the average revenue per customer in its business plan, a bakery can:

• Attract investors with its viable business plan for investors
• Secure funding from banks or others with its realistic financial plan
• Partner with businesses or organizations that complement or enhance its products or services
• Choose the best marketing, pricing, product, staff, location, etc. for its target market and customers

Setting Goals and Objectives for a Business Plan

Setting goals and objectives for a business plan is not a one-time task. It requires careful planning, research, analysis, and evaluation. To set effective goals and objectives for a business plan, one should follow some best practices, such as:

OPTION 1: Use the SMART framework. A SMART goal or objective is clear, quantifiable, realistic, aligned with the company’s mission and vision, and has a deadline. SMART stands for:

• Specific – The goal or objective should be clear, concise, and well-defined.
• Measurable – The goal or objective should be quantifiable or verifiable.
• Achievable – The goal or objective should be realistic and attainable.
• Relevant – The goal or objective should be aligned with the company’s vision, mission, and values.
• Time-bound – The goal or objective should have a deadline or timeframe.

For example, using the SMART criteria, a bakery can refine its business objective for increasing the average revenue per customer as follows:

• Specific – Increase revenue with new products and services from $5 to $5.50.
• Measurable – Track customer revenue monthly with sales reports.
• Achievable – Research the market, develop new products and services, and train staff to upsell and cross-sell.
• Relevant – Improve customer satisfaction and loyalty, profitability and cash flow, and market competitiveness.
• Time-bound – Achieve this objective in six months, from January 1st to June 30th.

OPTION 2: Use the OKR framework. OKR stands for O bjectives and K ey R esults. An OKR is a goal-setting technique that links the company’s objectives with measurable outcomes. An objective is a qualitative statement of what the company wants to achieve. A key result is a quantitative metric that shows how the objective will be achieved.

OPTION 3: Use the SWOT analysis. SWOT stands for S trengths, W eaknesses, O pportunities, and T hreats. A SWOT analysis is a strategic tool that helps the company assess the internal and external factors that affect its goals and objectives.

• Strengths – Internal factors that give the company an advantage over others. 
• Weaknesses – Internal factors that limit the company’s performance or growth. 
• Opportunities – External factors that allow the company to improve or expand. 
• Threats – External factors that pose a risk or challenge to the company.

For example, using these frameworks, a bakery might set the following goals and objectives for its SBA business plan :

Objective – To launch a new product line of gluten-free cakes in the next quarter.

Key Results:

• Research gluten-free cake market demand and preferences by month-end.
• Create and test 10 gluten-free cake recipes by next month-end.
• Make and sell 100 gluten-free cakes weekly online or in-store by quarter-end.

SWOT Analysis:

• Expertise and experience in baking and cake decorating.
• Loyal and satisfied customer base.
• Strong online presence and reputation.

Weaknesses:

• Limited production capacity and equipment.
• High production costs and low-profit margins.
• Lack of knowledge and skills in gluten-free baking.

Opportunities:

• Growing demand and awareness for gluten-free products.
• Competitive advantage and differentiation in the market.
• Potential partnerships and collaborations with health-conscious customers and organizations.
• Increasing competition from other bakeries and gluten-free brands.
• Changing customer tastes and preferences.
• Regulatory and legal issues related to gluten-free labeling and certification.

Examples of Business Goals and Objectives

To illustrate how to write business goals and objectives for a business plan, let’s use a hypothetical example of a bakery business called Sweet Treats. Sweet Treats is a small bakery specializing in custom-made cakes, cupcakes, cookies, and other baked goods for various occasions.

Here are some examples of possible startup business goals and objectives for Sweet Treats:

Earning and Preserving Profitability

Profitability is the ability of a company to generate more revenue than expenses. It indicates the financial health and performance of the company. Profitability is essential for a business to sustain its operations, grow its market share, and reward its stakeholders.

Some possible objectives for earning and preserving profitability for Sweet Treats are:

• To increase the gross profit margin by 5% in the next quarter by reducing the cost of goods sold
• To achieve a net income of $100,000 in the current fiscal year by increasing sales and reducing overhead costs

Ensuring Consistent Cash Flow

Cash flow is the amount of money that flows in and out of a company. A company needs to have enough cash to cover its operating expenses, pay its debts, invest in its growth, and reward its shareholders.

Some possible objectives for ensuring consistent cash flow for Sweet Treats are:

• Increase monthly operating cash inflow by 15% by the end of the year by improving the efficiency and productivity of the business processes
• Increase the cash flow from investing activities by selling or disposing of non-performing or obsolete assets

Creating and Maintaining Efficiency

Efficiency is the ratio of output to input. It measures how well a company uses its resources to produce its products or services. Efficiency can help a business improve its quality, productivity, customer satisfaction, and profitability.

Some possible objectives for creating and maintaining efficiency for Sweet Treats are:

• To reduce the production time by 10% in the next month by implementing lean manufacturing techniques
• To increase the customer service response rate by 20% in the next week by using chatbots or automated systems

Winning and Keeping Clients

Clients are the people or organizations that buy or use the products or services of a company. They are the source of revenue and growth for a company. Therefore, winning and keeping clients is vital to generating steady revenue, increasing customer loyalty, and enhancing word-of-mouth marketing.

Some possible objectives for winning and keeping clients for Sweet Treats are:

• To acquire 100 new clients in the next quarter by launching a referral program or a promotional campaign
• To retain 90% of existing clients in the current year by offering loyalty rewards or satisfaction guarantees

Building a Recognizable Brand

A brand is the name, logo, design, or other features distinguishing a company from its competitors. It represents the identity, reputation, and value proposition of a company. Building a recognizable brand is crucial for attracting and retaining clients and creating a loyal fan base.

Some possible objectives for building a recognizable brand for Sweet Treats are:

• To increase brand awareness by 50% in the next six months by creating and distributing engaging content on social media platforms
• To improve brand image by 30% in the next year by participating in social causes or sponsoring events that align with the company’s values

Expanding and Nurturing an Audience with Marketing

An audience is a group of people interested in or following a company’s products or services. They can be potential or existing clients, fans, influencers, or partners. Expanding and nurturing an audience with marketing is essential for increasing a company’s visibility, reach, and engagement.

Some possible objectives for expanding and nurturing an audience with marketing for Sweet Treats are:

• To grow the email list by 1,000 subscribers in the next month by offering a free ebook or a webinar
• To nurture leads by sending them relevant and valuable information through email newsletters or blog posts

Strategizing for Expansion

Expansion is the process of increasing a company’s size, scope, or scale. It can involve entering new markets, launching new products or services, opening new locations, or forming new alliances. Strategizing for expansion is important for diversifying revenue streams, reaching new audiences, and gaining competitive advantages.

Some possible objectives for strategizing for expansion for Sweet Treats are:

• To launch a new product or service line by developing and testing prototypes
• To open a new branch or franchise by securing funding and hiring staff

Template for Business Objectives

A template for writing business objectives is a format or structure that can be used as a guide or reference for creating your objectives. A template for writing business objectives can help you to ensure that your objectives are SMART, clear, concise, and consistent.

To use this template, fill in the blanks with your information. Here is an example of how you can use this template:

Example of Business Objectives

Our business is a _____________ (type of business) that provides _____________ (products or services) to _____________ (target market). Our vision is to _____________ (vision statement) and our mission is to _____________ (mission statement).

Our long-term business goals and objectives for the next _____________ (time period) are:

S pecific: We want to _____________ (specific goal) by _____________ (specific action).

M easurable: We will measure our progress by _____________ (quantifiable indicator).

A chievable: We have _____________ (resources, capabilities, constraints) that will enable us to achieve this goal.

R elevant: This goal supports our vision and mission by _____________ (benefit or impact).

T ime-bound: We will complete this goal by _____________ (deadline).

Repeat this process for each goal and objective for your business plan.

How to Monitor Your Business Objectives?

After setting goals and objectives for your business plan, you should check them regularly to see if you are achieving them. Monitoring your business objectives can help you to:

• Track your progress and performance
• Identify and overcome any challenges
• Adjust your actions and strategies as needed

Some of the tools and methods that you can use to monitor your business objectives are:

• Dashboards – Show key data and metrics for your objectives with tools like Google Data Studio, Databox, or DashThis.
• Reports – Get detailed information and analysis for your objectives with tools like Google Analytics, Google Search Console, or SEMrush.
• Feedback – Learn from your customers and their needs and expectations with tools like SurveyMonkey, Typeform, or Google Forms.

Strategies for Realizing Business Objectives

To achieve your business objectives, you need more than setting and monitoring them. You need strategies and actions that support them. Strategies are the general methods to reach your objectives. Actions are the specific steps to implement your strategies.

Different objectives require different strategies and actions. Some common types are:

• Marketing strategies
• Operational strategies
• Financial strategies
• Human resource strategies
• Growth strategies

To implement effective strategies and actions, consider these factors:

• Alignment – They should match your vision, mission, values, goals, and objectives
• Feasibility – They should be possible with your capabilities, resources, and constraints
• Suitability – They should fit the context and needs of your business

How OGSCapital Can Help You Achieve Your Business Objectives?

We at OGSCapital can help you with your business plan and related documents. We have over 15 years of experience writing high-quality business plans for various industries and regions. We have a team of business plan experts who can assist you with market research, financial analysis, strategy formulation, and presentation design. We can customize your business plan to suit your needs and objectives, whether you need funding, launching, expanding, or entering a new market. We can also help you with pitch decks, executive summaries, feasibility studies, and grant proposals. Contact us today for a free quote and start working on your business plan.

Frequently Asked Questions

What are the goals and objectives in business.

Goals and objectives in a business plan are the desired outcomes that a company works toward. To describe company goals and objectives for a business plan, start with your mission statement and then identify your strategic and operational objectives. To write company objectives, you must brainstorm, organize, prioritize, assign, track, and review them using the SMART framework and KPIs.

What are the examples of goals and objectives in a business plan?

Examples of goals and objectives in a business plan are: Goal: To increase revenue by 10% each year for the next five years. Objective: To launch a new product line and create a marketing campaign to reach new customers.

What are the 4 main objectives of a business?

The 4 main objectives of a business are economic, social, human, and organic. Economic objectives deal with financial performance, social objectives deal with social responsibility, human objectives deal with employee welfare, and organic objectives deal with business growth and development.

What are goals and objectives examples?

Setting goals and objectives for a business plan describes what a business or a team wants to achieve and how they will do it. For example: Goal: To provide excellent customer service. Objective: To increase customer satisfaction scores by 20% by the end of the quarter. 

At OGSCapital, our business planning services offer expert guidance and support to create a realistic and actionable plan that aligns with your vision and mission. Get in touch to discuss further!

OGSCapital’s team has assisted thousands of entrepreneurs with top-rated document, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.

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What are the different parts of a business plan?

A business plan is an aggregated document prepared as part of the creation, management, or takeover of a business. The document aims to detail the company's strategy and bring together a certain amount of important information for its recipients.

Photo Credit: Unsplash Luca Bravo

A business plan can be intended for the managers of the company themselves (internal business plan), or for external interlocutors, who can be investors, credit institutions, from which the company seeks a loan or a line of credit, suppliers to whom the company asks for payment terms, partners, customers.

The business plan is not a standardized document, but it must nevertheless contain enough information for its recipients to obtain answers to their questions or to want to work with the company. We will see what the different parts of a business plan are and the elements they contain.

Presentation of the project and the market Presentation of the strategy Legal and financial presentation

Presentation of the project and the market

First and foremost, the business plan must contain a detailed presentation of the project. It is a question here of mentioning the context, the elements which contributed to the emergence of the chosen concept, the stages of reflection, then the final choice of the project.

It is also advisable to present the various promoters of the project, to define the roles they plan to take on, the distribution of tasks between them. It is important to detail their motivations, what led them to choose this project, their curriculum vitae, their experience, and what they consider to be their strengths to lead this project.

After the presentation of the project, it is necessary to present the market in which the project fits, and in particular who are the main players, what are the major trends in this market, what are the size of the market and its dynamics.

Presentation of the strategy

The heart of the business plan concerns the presentation of the strategy chosen within the framework of the project, with a projection of 3 to 5 years. This strategy must be detailed and accompanied by a precise action plan, highlighting the various stages that are envisaged.

Legal and financial presentation

The business plan must also contain a legal review of the main legal aspects of the project (legal form, structure put in place, identified risks and risk coverage strategy).

Finally, one of the crucial parts of the business plan concerns the presentation of the main financial indicators and a financial inventory over at least three years. This involves presenting balance sheets and income statements, profitability or profitability indicators, cash flows, loan repayment capacities.

Each of these parts can be broken down into several sub-parts, depending on the needs and objectives of the business plan.

Sources: - Faire son business plan - Bpifrance-creation.fr - Les neuf éléments incontournables d'un business plan réussi - L'Express L'Entreprise

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11.4 The Business Plan

Learning objectives.

By the end of this section, you will be able to:

• Describe the different purposes of a business plan
• Describe and develop the components of a brief business plan
• Describe and develop the components of a full business plan

Unlike the brief or lean formats introduced so far, the business plan is a formal document used for the long-range planning of a company’s operation. It typically includes background information, financial information, and a summary of the business. Investors nearly always request a formal business plan because it is an integral part of their evaluation of whether to invest in a company. Although nothing in business is permanent, a business plan typically has components that are more “set in stone” than a business model canvas , which is more commonly used as a first step in the planning process and throughout the early stages of a nascent business. A business plan is likely to describe the business and industry, market strategies, sales potential, and competitive analysis, as well as the company’s long-term goals and objectives. An in-depth formal business plan would follow at later stages after various iterations to business model canvases. The business plan usually projects financial data over a three-year period and is typically required by banks or other investors to secure funding. The business plan is a roadmap for the company to follow over multiple years.

Some entrepreneurs prefer to use the canvas process instead of the business plan, whereas others use a shorter version of the business plan, submitting it to investors after several iterations. There are also entrepreneurs who use the business plan earlier in the entrepreneurial process, either preceding or concurrently with a canvas. For instance, Chris Guillebeau has a one-page business plan template in his book The $100 Startup . 48 His version is basically an extension of a napkin sketch without the detail of a full business plan. As you progress, you can also consider a brief business plan (about two pages)—if you want to support a rapid business launch—and/or a standard business plan.

As with many aspects of entrepreneurship, there are no clear hard and fast rules to achieving entrepreneurial success. You may encounter different people who want different things (canvas, summary, full business plan), and you also have flexibility in following whatever tool works best for you. Like the canvas, the various versions of the business plan are tools that will aid you in your entrepreneurial endeavor.

Business Plan Overview

Most business plans have several distinct sections ( Figure 11.16 ). The business plan can range from a few pages to twenty-five pages or more, depending on the purpose and the intended audience. For our discussion, we’ll describe a brief business plan and a standard business plan. If you are able to successfully design a business model canvas, then you will have the structure for developing a clear business plan that you can submit for financial consideration.

Both types of business plans aim at providing a picture and roadmap to follow from conception to creation. If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept.

The full business plan is aimed at executing the vision concept, dealing with the proverbial devil in the details. Developing a full business plan will assist those of you who need a more detailed and structured roadmap, or those of you with little to no background in business. The business planning process includes the business model, a feasibility analysis, and a full business plan, which we will discuss later in this section. Next, we explore how a business plan can meet several different needs.

Purposes of a Business Plan

A business plan can serve many different purposes—some internal, others external. As we discussed previously, you can use a business plan as an internal early planning device, an extension of a napkin sketch, and as a follow-up to one of the canvas tools. A business plan can be an organizational roadmap , that is, an internal planning tool and working plan that you can apply to your business in order to reach your desired goals over the course of several years. The business plan should be written by the owners of the venture, since it forces a firsthand examination of the business operations and allows them to focus on areas that need improvement.

Refer to the business venture throughout the document. Generally speaking, a business plan should not be written in the first person.

A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.

You can also use your business plan as a contingency plan by outlining some “what-if” scenarios and exploring how you might respond if these scenarios unfold. Pretty Young Professional launched in November 2010 as an online resource to guide an emerging generation of female leaders. The site focused on recent female college graduates and current students searching for professional roles and those in their first professional roles. It was founded by four friends who were coworkers at the global consultancy firm McKinsey. But after positions and equity were decided among them, fundamental differences of opinion about the direction of the business emerged between two factions, according to the cofounder and former CEO Kathryn Minshew . “I think, naively, we assumed that if we kicked the can down the road on some of those things, we’d be able to sort them out,” Minshew said. Minshew went on to found a different professional site, The Muse , and took much of the editorial team of Pretty Young Professional with her. 49 Whereas greater planning potentially could have prevented the early demise of Pretty Young Professional, a change in planning led to overnight success for Joshua Esnard and The Cut Buddy team. Esnard invented and patented the plastic hair template that he was selling online out of his Fort Lauderdale garage while working a full-time job at Broward College and running a side business. Esnard had hundreds of boxes of Cut Buddies sitting in his home when he changed his marketing plan to enlist companies specializing in making videos go viral. It worked so well that a promotional video for the product garnered 8 million views in hours. The Cut Buddy sold over 4,000 products in a few hours when Esnard only had hundreds remaining. Demand greatly exceeded his supply, so Esnard had to scramble to increase manufacturing and offered customers two-for-one deals to make up for delays. This led to selling 55,000 units, generating $700,000 in sales in 2017. 50 After appearing on Shark Tank and landing a deal with Daymond John that gave the “shark” a 20-percent equity stake in return for $300,000, The Cut Buddy has added new distribution channels to include retail sales along with online commerce. Changing one aspect of a business plan—the marketing plan—yielded success for The Cut Buddy.

Link to Learning

Watch this video of Cut Buddy’s founder, Joshua Esnard, telling his company’s story to learn more.

If you opt for the brief business plan, you will focus primarily on articulating a big-picture overview of your business concept. This version is used to interest potential investors, employees, and other stakeholders, and will include a financial summary “box,” but it must have a disclaimer, and the founder/entrepreneur may need to have the people who receive it sign a nondisclosure agreement (NDA) . The full business plan is aimed at executing the vision concept, providing supporting details, and would be required by financial institutions and others as they formally become stakeholders in the venture. Both are aimed at providing a picture and roadmap to go from conception to creation.

Types of Business Plans

The brief business plan is similar to an extended executive summary from the full business plan. This concise document provides a broad overview of your entrepreneurial concept, your team members, how and why you will execute on your plans, and why you are the ones to do so. You can think of a brief business plan as a scene setter or—since we began this chapter with a film reference—as a trailer to the full movie. The brief business plan is the commercial equivalent to a trailer for Field of Dreams , whereas the full plan is the full-length movie equivalent.

Brief Business Plan or Executive Summary

As the name implies, the brief business plan or executive summary summarizes key elements of the entire business plan, such as the business concept, financial features, and current business position. The executive summary version of the business plan is your opportunity to broadly articulate the overall concept and vision of the company for yourself, for prospective investors, and for current and future employees.

A typical executive summary is generally no longer than a page, but because the brief business plan is essentially an extended executive summary, the executive summary section is vital. This is the “ask” to an investor. You should begin by clearly stating what you are asking for in the summary.

In the business concept phase, you’ll describe the business, its product, and its markets. Describe the customer segment it serves and why your company will hold a competitive advantage. This section may align roughly with the customer segments and value-proposition segments of a canvas.

Next, highlight the important financial features, including sales, profits, cash flows, and return on investment. Like the financial portion of a feasibility analysis, the financial analysis component of a business plan may typically include items like a twelve-month profit and loss projection, a three- or four-year profit and loss projection, a cash-flow projection, a projected balance sheet, and a breakeven calculation. You can explore a feasibility study and financial projections in more depth in the formal business plan. Here, you want to focus on the big picture of your numbers and what they mean.

The current business position section can furnish relevant information about you and your team members and the company at large. This is your opportunity to tell the story of how you formed the company, to describe its legal status (form of operation), and to list the principal players. In one part of the extended executive summary, you can cover your reasons for starting the business: Here is an opportunity to clearly define the needs you think you can meet and perhaps get into the pains and gains of customers. You also can provide a summary of the overall strategic direction in which you intend to take the company. Describe the company’s mission, vision, goals and objectives, overall business model, and value proposition.

Rice University’s Student Business Plan Competition, one of the largest and overall best-regarded graduate school business-plan competitions (see Telling Your Entrepreneurial Story and Pitching the Idea ), requires an executive summary of up to five pages to apply. 51 , 52 Its suggested sections are shown in Table 11.2 .

Are You Ready?

Create a brief business plan.

Fill out a canvas of your choosing for a well-known startup: Uber, Netflix, Dropbox, Etsy, Airbnb, Bird/Lime, Warby Parker, or any of the companies featured throughout this chapter or one of your choice. Then create a brief business plan for that business. See if you can find a version of the company’s actual executive summary, business plan, or canvas. Compare and contrast your vision with what the company has articulated.

• These companies are well established but is there a component of what you charted that you would advise the company to change to ensure future viability?
• Map out a contingency plan for a “what-if” scenario if one key aspect of the company or the environment it operates in were drastically is altered?

Full Business Plan

Even full business plans can vary in length, scale, and scope. Rice University sets a ten-page cap on business plans submitted for the full competition. The IndUS Entrepreneurs , one of the largest global networks of entrepreneurs, also holds business plan competitions for students through its Tie Young Entrepreneurs program. In contrast, business plans submitted for that competition can usually be up to twenty-five pages. These are just two examples. Some components may differ slightly; common elements are typically found in a formal business plan outline. The next section will provide sample components of a full business plan for a fictional business.

Executive Summary

The executive summary should provide an overview of your business with key points and issues. Because the summary is intended to summarize the entire document, it is most helpful to write this section last, even though it comes first in sequence. The writing in this section should be especially concise. Readers should be able to understand your needs and capabilities at first glance. The section should tell the reader what you want and your “ask” should be explicitly stated in the summary.

Describe your business, its product or service, and the intended customers. Explain what will be sold, who it will be sold to, and what competitive advantages the business has. Table 11.3 shows a sample executive summary for the fictional company La Vida Lola.

Business Description

This section describes the industry, your product, and the business and success factors. It should provide a current outlook as well as future trends and developments. You also should address your company’s mission, vision, goals, and objectives. Summarize your overall strategic direction, your reasons for starting the business, a description of your products and services, your business model, and your company’s value proposition. Consider including the Standard Industrial Classification/North American Industry Classification System (SIC/NAICS) code to specify the industry and insure correct identification. The industry extends beyond where the business is located and operates, and should include national and global dynamics. Table 11.4 shows a sample business description for La Vida Lola.

Industry Analysis and Market Strategies

Here you should define your market in terms of size, structure, growth prospects, trends, and sales potential. You’ll want to include your TAM and forecast the SAM . (Both these terms are discussed in Conducting a Feasibility Analysis .) This is a place to address market segmentation strategies by geography, customer attributes, or product orientation. Describe your positioning relative to your competitors’ in terms of pricing, distribution, promotion plan, and sales potential. Table 11.5 shows an example industry analysis and market strategy for La Vida Lola.

Competitive Analysis

The competitive analysis is a statement of the business strategy as it relates to the competition. You want to be able to identify who are your major competitors and assess what are their market shares, markets served, strategies employed, and expected response to entry? You likely want to conduct a classic SWOT analysis (Strengths Weaknesses Opportunities Threats) and complete a competitive-strength grid or competitive matrix. Outline your company’s competitive strengths relative to those of the competition in regard to product, distribution, pricing, promotion, and advertising. What are your company’s competitive advantages and their likely impacts on its success? The key is to construct it properly for the relevant features/benefits (by weight, according to customers) and how the startup compares to incumbents. The competitive matrix should show clearly how and why the startup has a clear (if not currently measurable) competitive advantage. Some common features in the example include price, benefits, quality, type of features, locations, and distribution/sales. Sample templates are shown in Figure 11.17 and Figure 11.18 . A competitive analysis helps you create a marketing strategy that will identify assets or skills that your competitors are lacking so you can plan to fill those gaps, giving you a distinct competitive advantage. When creating a competitor analysis, it is important to focus on the key features and elements that matter to customers, rather than focusing too heavily on the entrepreneur’s idea and desires.

Operations and Management Plan

In this section, outline how you will manage your company. Describe its organizational structure. Here you can address the form of ownership and, if warranted, include an organizational chart/structure. Highlight the backgrounds, experiences, qualifications, areas of expertise, and roles of members of the management team. This is also the place to mention any other stakeholders, such as a board of directors or advisory board(s), and their relevant relationship to the founder, experience and value to help make the venture successful, and professional service firms providing management support, such as accounting services and legal counsel.

Table 11.6 shows a sample operations and management plan for La Vida Lola.

Marketing Plan

Here you should outline and describe an effective overall marketing strategy for your venture, providing details regarding pricing, promotion, advertising, distribution, media usage, public relations, and a digital presence. Fully describe your sales management plan and the composition of your sales force, along with a comprehensive and detailed budget for the marketing plan. Table 11.7 shows a sample marketing plan for La Vida Lola.

Financial Plan

A financial plan seeks to forecast revenue and expenses; project a financial narrative; and estimate project costs, valuations, and cash flow projections. This section should present an accurate, realistic, and achievable financial plan for your venture (see Entrepreneurial Finance and Accounting for detailed discussions about conducting these projections). Include sales forecasts and income projections, pro forma financial statements ( Building the Entrepreneurial Dream Team , a breakeven analysis, and a capital budget. Identify your possible sources of financing (discussed in Conducting a Feasibility Analysis ). Figure 11.19 shows a template of cash-flow needs for La Vida Lola.

Entrepreneur In Action

Laughing man coffee.

Hugh Jackman ( Figure 11.20 ) may best be known for portraying a comic-book superhero who used his mutant abilities to protect the world from villains. But the Wolverine actor is also working to make the planet a better place for real, not through adamantium claws but through social entrepreneurship.

A love of java jolted Jackman into action in 2009, when he traveled to Ethiopia with a Christian humanitarian group to shoot a documentary about the impact of fair-trade certification on coffee growers there. He decided to launch a business and follow in the footsteps of the late Paul Newman, another famous actor turned philanthropist via food ventures.

Jackman launched Laughing Man Coffee two years later; he sold the line to Keurig in 2015. One Laughing Man Coffee café in New York continues to operate independently, investing its proceeds into charitable programs that support better housing, health, and educational initiatives within fair-trade farming communities. 55 Although the New York location is the only café, the coffee brand is still distributed, with Keurig donating an undisclosed portion of Laughing Man proceeds to those causes (whereas Jackman donates all his profits). The company initially donated its profits to World Vision, the Christian humanitarian group Jackman accompanied in 2009. In 2017, it created the Laughing Man Foundation to be more active with its money management and distribution.

• You be the entrepreneur. If you were Jackman, would you have sold the company to Keurig? Why or why not?
• Would you have started the Laughing Man Foundation?
• What else can Jackman do to aid fair-trade practices for coffee growers?

What Can You Do?

Textbooks for change.

Founded in 2014, Textbooks for Change uses a cross-compensation model, in which one customer segment pays for a product or service, and the profit from that revenue is used to provide the same product or service to another, underserved segment. Textbooks for Change partners with student organizations to collect used college textbooks, some of which are re-sold while others are donated to students in need at underserved universities across the globe. The organization has reused or recycled 250,000 textbooks, providing 220,000 students with access through seven campus partners in East Africa. This B-corp social enterprise tackles a problem and offers a solution that is directly relevant to college students like yourself. Have you observed a problem on your college campus or other campuses that is not being served properly? Could it result in a social enterprise?

Work It Out

Franchisee set out.

A franchisee of East Coast Wings, a chain with dozens of restaurants in the United States, has decided to part ways with the chain. The new store will feature the same basic sports-bar-and-restaurant concept and serve the same basic foods: chicken wings, burgers, sandwiches, and the like. The new restaurant can’t rely on the same distributors and suppliers. A new business plan is needed.

• What steps should the new restaurant take to create a new business plan?
• Should it attempt to serve the same customers? Why or why not?

This New York Times video, “An Unlikely Business Plan,” describes entrepreneurial resurgence in Detroit, Michigan.

• 48 Chris Guillebeau. The $100 Startup: Reinvent the Way You Make a Living, Do What You Love, and Create a New Future . New York: Crown Business/Random House, 2012.
• 49 Jonathan Chan. “What These 4 Startup Case Studies Can Teach You about Failure.” Foundr.com . July 12, 2015. https://foundr.com/4-startup-case-studies-failure/
• 50 Amy Feldman. “Inventor of the Cut Buddy Paid YouTubers to Spark Sales. He Wasn’t Ready for a Video to Go Viral.” Forbes. February 15, 2017. https://www.forbes.com/sites/forbestreptalks/2017/02/15/inventor-of-the-cut-buddy-paid-youtubers-to-spark-sales-he-wasnt-ready-for-a-video-to-go-viral/#3eb540ce798a
• 51 Jennifer Post. “National Business Plan Competitions for Entrepreneurs.” Business News Daily . August 30, 2018. https://www.businessnewsdaily.com/6902-business-plan-competitions-entrepreneurs.html
• 52 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition . March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf
• 53 “Rice Business Plan Competition, Eligibility Criteria and How to Apply.” Rice Business Plan Competition. March 2020. https://rbpc.rice.edu/sites/g/files/bxs806/f/2020%20RBPC%20Eligibility%20Criteria%20and%20How%20to%20Apply_23Oct19.pdf; Based on 2019 RBPC Competition Rules and Format April 4–6, 2019. https://rbpc.rice.edu/sites/g/files/bxs806/f/2019-RBPC-Competition-Rules%20-Format.pdf
• 54 Foodstart. http://foodstart.com
• 55 “Hugh Jackman Journey to Starting a Social Enterprise Coffee Company.” Giving Compass. April 8, 2018. https://givingcompass.org/article/hugh-jackman-journey-to-starting-a-social-enterprise-coffee-company/

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Compose the Business Plan

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Entrepreneurial business plan is the market strategy to seek vision, purpose, and approaches of starting a business, as well as a stepping stone to investors. It is of great importance for a successful venture to comprehend the core elements, main structure, and writing strategy of business plans.

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How to Write Your First Business Plan

Planning a business means planning to succeed in business. A business plan helps you define what you do so that you can explain this clearly and succinctly to customers. It helps you see if your plans are going astray so that you can take corrective action. It helps you think about your position in your market and how to be competitive.

It’s worth noting that there are different schools of thought on business planning. Some people argue it’s unnecessary, such as the authors of Rework , Jason Fried and David Heinemeier Hansson, who also founded 37 Signals and created Ruby on Rails. Some say that it’s essential such as Richard Branson, the founder of Virgin. Others, such as the Interaction Design Foundation, try to take a middle path like the one we’ve detailed for you here.

We advocate for a simple plan that helps you towards your goals and keeps you on track without getting you bogged down forever in writing that plan.

Not every business has a business plan, but businesses that do tend to do much better than those that don’t have one. Some very good reasons to have a business plan include:

It helps you to define what your business is (and isn’t) about.

It helps you plan how to sell and market your services.

It can define your current objectives and help you evaluate your progress against them.

It can help to raise funding or with a loan application.

It can help to define relationships between business partners (including expectations and how to end such a partnership if things don’t work out).

It can help you value a business if you want to sell it.

Here, we will help you get started creating your business plan whether you’re a freelancer or an entrepreneur. You’ll get to know what goes into a business plan for a start-up business. It’s enough to get you started.

Now, this article can’t teach you everything you need to know about business planning. Excellent books that run to hundreds of pages which define everything in detail for a complex business plan await you on a shelf or in a warehouse. Using these, when your business grows bigger and more successful, you’ll have to find more in-depth knowledge and advice. When you’re 6 to 24 months down the road and need to develop your business plan further, that’ll probably be the right time to pick up one of those heavy books and start a more in-depth planning exercise.

Author/Copyright holder: Philip Wilson. Copyright terms and licence: CC BY-ND 2.0

Planning a business means planning to succeed in business.

What Should Be In Your First Business Plan?

Your first business plan will be for your own use, so it doesn’t need to be a thing of beauty which has been professionally polished. It shouldn’t be more than a couple of pages. You can save that long, polished business plan for the day that you want to use the plan to secure investment in your business or to help you guide your employees in the right direction. It should take a maximum of one day to create your first business plan.

Your First Business Plan Should Include

1. a brief company description.

The name of your company, the date it was formed, the names of any shareholders, your company registration number, your address, etc. In the future, you’ll add a bit more detail to this section and add important milestones in the development of your business. To start, keep it short and simple.

2. A description of the services you offer

This should also include a description of how they stand out (your unique selling points – USPs) from your competition. For example, it might be that your logo design is proven to increase brand recognition by 40% or that your sales copy delivers increased sales by 25%.

3. A simple market analysis

Who are your customers? Who are your competitors? What’s the size of the market you will serve? How will the market grow in the next few years? You should make a simple SWOT analysis where you define the opportunities and the threats in your market as well as your business’s strengths and weaknesses: nothing too complex—just enough detail to be sure that you understand the market you are working in.

Market analysis is often done using a simple SWOT analysis – where you assess the strengths, weaknesses, opportunities and threats of your business and competitors.

4. An implementation strategy

How will you sell your services? How will you put those plans into action? What milestones will you use to show progress in your plan?

5. A personal summary

In essence, this a canned version of your CV—what’s your background? Your key accomplishments? Your overall relevant experience?

6. A financial plan

What are your projected sales? What will your cash flow look like? How much profit do you expect to make? For this exercise, be pessimistic and realistic; do not assume you will be working for forty hours a week, every week, at your maximum rate from the outset. It’s unlikely that you will achieve that—ever. It’s much better to underestimate your financial performance and overachieve than vice versa. Never forget that you’re going to spend a lot of time on unpaid work, from accounting to marketing to administration. And, perhaps, you would like some time for vacation as well?

7. A short summary or executive summary

The summary is often called the “executive summary”, of the whole plan. This will help when you come to selling your services; it’s the basis of your elevator pitch – which is what you’d say to your ideal clients if you were trapped in an elevator with them for five minutes.

Your executive summary should include:

what your core service is

who your main customers are

why they should choose you and your services over your competitors

how you will sell your services

It can’t be clearer than, this can it? You would think that it doesn’t matter if your executive summary sucks if it’s only meant for yourself. But really, the executive summary can be your biggest help and guide in understanding and summarizing what your main services are, what makes your services more attractive than your competitors’, who you sell your services to and how you sell them.

It takes time to develop your elevator pitch and executive summary as it should only sum up the very essence of your business plan. That’s why you should start by defining the rest of your business plan and then, at the very end of your process of making your business plan, you’ll be able to define the essence and the executive summary of your business plan.

You should always place your executive summary in the very beginning of your business plan.

Best practice: Ideally, you’ll be able to explain your executive summary as an elevator pitch in only a few sentences. You should continue working on your executive summary until you are able to explain your perfect pitch in one minute. You should also practice an elaborated version of your pitch which should take approximately five minutes. You’ll find it harder to explain yourself in one minute than in five.

You can start practicing by inserting your answers into this short sentence: “My core service is (xxx) which is essential to (xx customers), because I can help them (in xx ways) compared to my competitors.”

When you think you’ve nailed the two versions of your elevator pitch, you should try saying it out loud, and when you can say it in approximately one- and five-minute versions, you should pitch your executive summaries to your friends, family, and, of course, your peers—and get their feedback before you reach out to your future clients.

You’ll find that you will improve your pitch every time you practice it. Most likely, you will find that for each pitch you make, you can make it shorter and more precise. Your friends’ and peers’ questions and feedback will help you crystallize what your soon-to-be business is all about.

It may feel a bit odd the first few times you try your pitch, but you’ll soon understand that this is the best way to get to the core of what you will be doing as a freelancer or entrepreneur. This way, it will be much easier to move from planning to executing the plan in the near future.

Length of your first business plan

Keep your plan as short as possible. Aim for two pages. A short, simple plan is easy to review and refer to. If you write something resembling a book, it will serve no purpose except to take up a lot of time that could be spent doing something useful when you write it. You’ll never want to read it or see it again if it’s that long. Keep it short, sweet and to the point.

The Take Away

A business plan serves a purpose for a start-up whether you’re a freelancer or an entrepreneur. It helps you define what you do so that you can explain this clearly and succinctly to customers. It helps you see if your plans are going astray so that you can take corrective action. It helps you think about your position in your market and how to be competitive.

Writing a business plan for your own use should be a simple, straightforward exercise. You don’t need to worry about presentation, spelling or grammar – no one else will see it. You just need to capture the relevant information.

Later on, when your business is better established, you’ll want to update the plan, and if you then intend to show it to other people, you might want to read up on how to develop a more complex plan.

You might also, at that point, consider using a software tool for writing your business plan. However, to start with—keep it simple. Don’t get bogged down with the process; if you spend more than a day on this, you’re spending too much time and overthinking things. You can always go back and correct your business plan’s course when you’ve started working.

References & Where to Learn More

Hero Image: Author/Copyright holder: Pixabay. Copyright terms and licence: CC0

You can also find some great example business plans here: 500+ Free business plan examples

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• Financial management

Financing plan: the complete Guide

The financial plan is an integral part of financial forecasting when starting a company – but it’s also much more. This accounting document is an excellent analytical support tool to help you first determine if your project is viable and then plan your finances throughout the life cycle of your business. How do you come up with this financial document and what data do you put in there? What is its role in your business plan as a whole? And how do you analyse it? The answers to all of these questions can be found in this article.

👉How to build a cash flow budget ?

What is a financial plan?

The financial plan is a financial document (a table) that shows your requirements and resources.

Requirements : these are aspects that a company needs to fund when starting up. Investments at the start-up stage are varied – for an online seller they may include a website, whereas for a shoe manufacturer they may include some machinery.

Resources : these are the means available to the company and can come from a variety of different sources, such as subsidies or grants, interest-free loans, other borrowings and so on.

Why should you draw up a financial plan?

The financial plan is first and foremost aimed directly at financiers. It is an accounting document that provides reassures to them by:

• Proving to them that your project is funded effectively and in a stable manner
• Allowing them to see and gauge the risks being taken by the project sponsor
• Giving them a comprehensive overview of the financing situation

Drawing up a financial plan also helps to answer practical – if not essential – questions, such as:

• Is this the right time to start my business ? If the plan reveals any financial instability, this is a warning sign of hypothetical bankruptcy
• Does the business model need to be revised ? If the finances highlight that there are risks or fragility, this is an indication that you should reduce your long-term requirements. This could mean renting equipment rather than purchasing it or thinking about obtaining additional funding

When looking at financing and establishing a project, whether it’s a start-up, a recovery or a development, there are two types of financial plan to consider: an initial financial plan and a long-term financial plan.

Initial financial plan

As the name suggests, an initial financial plan is used at the start of a project. In this scenario, the aim is to make an inventory of the long-term requirements that are imperative for starting up and all of the long-term resources used to finance these requirements.

You need to do two things to create your initial financial plan:

• First, calculate your project’s long-term requirements
• Then, allocate the resources necessary to subsidise these requirements

This type of financial plan helps you to ensure that the long-term requirements that are essential to launching the project can be funded from the financial resources committed.

Long-term forecast financial plan

This table is based on the initial financial plan and aggregates the new data relating to the development and growth of your business across a number of predefined years (a period of three years is the most common).

The following new data is added:

• Long-term financial resources : we will look at potential self-financing capabilities, possible reduction in working capital requirement (WCR) and contributions from capital stock or borrowed funds
• Long-term requirements : repayment of borrowed funds, increase in WCR, dividends and new or recent investments

With a long-term financial plan, you can ensure that your company’s financial structure is strengthened and will be successful for the period under review.

In contrast, if the situation is in decline, then you will need to rethink how your company will operate and consider what actions to take to prevent it from facing medium- or long-term financial difficulties.

The difference between the financial plan and the cash flow plan

The cash flow plan is one of the four main financial business plan tables, which are:

• An initial financial plan
• A forecast income statement
• A cash flow plan
• A three-year forecast

A cash flow plan is a table showing all planned cash inflows and cash outflows month by month during your company’s first year of operation.

The table of the financial plan, on the other hand, contains two columns: one that identifies your investment requirements, such as the WCR, and another that shows your financial resources (e.g. loans and personal savings).

The difference between your requirements and your resources indicates either a cash surplus or a shortfall.

Example of a financial plan

To help you get your financial plan right, here is a template table that you can use to get started.

The above example of an initial financial plan shows that the financial resources exceed the total requirements to be financed. In this situation, the company enjoys some flexibility to compensate for the incalculable aspects of its project.

Frame of reference for the initial financial plan and useful tips

When you first draw up an initial financial plan, you should aim to obtain sufficient financial resources to at least balance your plan, i.e. so that the total requirements are equal to the total resources.

Adding a cash flow row provides a useful indicator as it gives you an idea of how much leeway you have in case you need to deal with any unexpected eventualities.

When putting your project financing in place, you should also consider the difference between financing from your own funds (capital contributions, contributions from partners) and from borrowed funds. It is usually recommended that at least 30% of your project’s activities be funded using your own funds.

How do you draw up a financial plan?

1. budget your start-up costs.

• You will incur a number of costs before your business even starts operating and these current expenses can include:
• Carrying out a market study

Putting together a financial plan with help from a chartered accountant

• All transport costs incurred when meeting with your partners, e.g. clients, suppliers etc.
• C__ommunication and marketing__ expenses, e.g. creating a website
• Filing a trademark or patent , acquiring licenses etc.
• Registration fees , solicitor/notary fees etc.

2. Identify and evaluate all investments

To do this, you have to list all of your direct and indirect costs.

Direct costs : these include remuneration for in-house staff (and remuneration for external staff, if you use consultants or contractors) and the costs of purchasing and/or renting equipment (rooms and computers, but also project-related supplies).

Indirect costs : these are all of your operating expenses, such as for heating and communications, and management costs, such as salaries for inter-departmental supporting functions (marketing, accounting, administrative)

3. Calculate your working capital requirement

A key component of the financial plan, the working capital requirement (WCR) must be estimated when you start operating.

The initial WCR is calculated as follows:

4. Determine contributions

The intention here is to gather information on all of your internal financing solutions; there are three types:

Cash contributions : these are contributions from partners or shareholders in your company. In return, these contributors receive equity from the company. These contributions are incredibly useful when starting up a project as these funds benefit your company and are not intended to be repaid

Contributions in kind : these refer to all non-financial contributions and can include material assets such as computers, cars and property. Your company benefits from material assets as it enables you to commence operations without spending any money

Partner current account contributions : this solution gives partners and shareholders another way of contributing liquidity to your company . More specifically, this option is a loan granted by a partner to your company to finance its business

5. Look into all the financing options available to your company

Assessing your external financing requirements is another important step in putting together a financial plan.

When a new entrepreneur has exhausted their personal financing solutions, they can turn to a financial institution for a bank loan. You can also make use of national or local institutional aid facilities – they can even open up avenues for tax exemptions and tax credit. Alternatively, you can also reach out to investment professionals, such as business angels, or explore crowdfunding solutions.

6. Balance your financial plan and analyse its coherence

In terms of the overall quantity of resources, the balance of your initial financial plan will be either negative, balanced out or positive.

• Negative financial plan balance : this indicates that the total requirements are greater than the total resources. In this case, new funding must be sought
• Balanced financial plan : the total requirements are equal to the total resources. All the requirements needed to start your business are covered but you don’t have a safety net
• Positive financial plan balance : the total requirements are less than the total resources. All of the requirements needed to kick off your project are covered and you also have some room for manoeuvre

Define financial plan requirements

The requirements set out in your financial plan are broken down into several categories.

Establishment costs

These costs correspond to cash outflows relating to the creation of your company, such as fees for formalities (e.g. registration, advertising), solicitors’ fees for drafting legal statutes, Companies House registration fees, tax or accounting advice costs and so on. Establishment costs are shown in the assets section of your balance sheet, under intangible assets.

Intangible assets, tangible assets and financial assets

These relate to all permanent acquisitions that make up your company’s assets . An acquisition is considered to be an asset if its unit price exceeds €500 (excluding tax).

• Intangible assets : these are all non-physical assets that are used solely for your company’s purposes over the long term (e.g. brand, patent, license, software, client database etc.)
• Tangible assets : these relate to physical assets that will be used over several accounting years. Some of the most frequent examples are land, computer equipment, furniture, machinery, vans and so on. These assets are used for your company’s activities (e.g. production, rental to third parties, supply of goods and services)
• Financial assets : in accounting, these are long-term assets of a financial nature that your company possesses. These frequently include equity shares, financial claims, loans granted to third parties and even safekeeping accounts and bonds

Working capital requirement (WCR)

This refers to an amount of money that is financed to ensure that your company can operate under favourable conditions. WCR needs to be estimated when you launch your business. In fact, you will know your company’s short-term financing requirements (stocks, VAT etc.) from the very beginning.

Start-up cash flow

As the name suggests, the start-up cash flow covers the first expenses that your company is exposed to – even before it receives any income.

So, how do you calculate your initial cash flow requirement?

To calculate your initial cash flow requirement, you need to anticipate certain events that may affect your cash flow in the months following the launch of your business. A cash flow plan is one of the most effective ways of doing this. This table will allow you not only to monitor but to anticipate all cash inflows and outflows. This financial table will provide you with a concrete monthly cash balance . If this balance is negative, this indicates that the initial cash flow estimate is insufficient and fragile. In this way, it’s used as a tool for forecasting financial risks.

You have several options for funding your start-up cash flow:

Personal contributions

• Cash flow financing
• Other funding options

Define financial plan resources

In order to be able to meet all of your initial requirements and your working capital requirement, you have to set out your financial resources.

These assets are made up entirely from contributions made by the founder of the company and their potential partners. These contributions can be obtained in different ways, such as crowdfunding or personal bank loans. When starting a business, the business generated is often not sufficient to create the cash flow needed to finance the operating cycle. All of these resources take care of this.

This refers to the different types of loan taken out by your company. Most of the time, they are requested from banks or credit institutions and can include business start-up loans or interest-free loans. All of these elements must be included in your financial plan.

Self-financing capacity

Self-financing capacity is an important indicator within your financial plan that must be calculated and included regardless of the size of your project and whether or not your company is applying for a loan. In concrete terms, self-financing capacity refers to the resources that are freed up by your company and are potentially cashable. These resources come from operational activities. Essentially, they are used to pay the shareholders, pay suppliers, pay taxes and, most importantly, to make ongoing investments.

Focus on the three-year financial plan

The three-year financial plan is an accounting table that is made up of two main parts, just like the initial financial plan:

• Resources (projected income)
• Requirements (how this income is used)

The purpose of the plan is to identify whether the company has a financing shortfall or a financing excess over the next three years. Gathering this information is particularly useful because when it highlights a need for financing, you know that you need to seek new financing from investors or banks. If you have a surplus, you can decide to make new investments to support your growth.

As discussed previously, the initial financial plan is a basic tool. Beyond that, all events relating to the years being budgeted must be included.

The key elements to include are :

• New investments made
• New capital contributions or partner current account contributions
• Borrowed funds
• Dividend distributions
• Variance in the working capital requirement
• Capacity for or lack of self-financing

The financial ratios of the financial plan

In accounting, ratios allow you to gain an overall picture of your company’s financial health. There are a number of ratios and we have listed a few below:

Debt capacity

When you are managing a business start-up or business development project, there is one parameter to take into account – your debt capacity. It’s impossible to borrow all of the financing you require, so you have to estimate your borrowing capacity. When you borrow, the bank usually funds up to 70% of your project budget, with the remaining 30% coming from personal contributions.

Repayment capacity

This indicator tells you how many years it will take to repay your loans. Repayment capacity is calculated as follows:

You need to know that your company’s capacity for repaying your liabilities is not the only variable that the bank will be scrutinising. Other parameters, such as the net debt ratio or gearing ratio, are analysed too. The debt ratio measures the level of a company’s debt in relation to its own capital. Credit institutions pay considerable attention to this ratio as it indicates your repayment capacity. In other words, it measures your credit rating.

The debt ratio is calculated as follows:

Analyse your financial plan

The aim of this comparative review is to ensure that the initial requirements related to the launch of your activity have been covered and that your structure remains stable and healthy across all of the budgeted years.

Don’t forget that for your company’s financing to be sustainable and viable, the sum of the requirements must be equal to or less than the sum of the resources.

Ideally, the total amount of resources should be higher, as this leaves room for manoeuvre in the event of unforeseen circumstances.

When requirements are too high When requirements are high and threaten to upset the balance, the first thing you need to do is consider other sources of external financing. If this happens, be careful not to destabilise personal contributions and borrowed funds. Doing this will actually impact your repayment capacity.

Essentially, you should use this financial table for forecasting purposes, incorporating variances in the working capital requirement and dividends over several accounting years. In doing so, your initial financial plan will grow into a fully-fledged forecast.

The financial plan is useful in many ways: it assesses your project budget, it helps you to identify financial partners and it helps you know if bank financing is an option. It is undoubtedly a vital tool from the moment it is first created and can be used by any company, whether it’s a very small business (VSB) , small and medium-sized enterprise (SME) or large company .

Do you need to better anticipate your cash flow? Agicap makes it easy for you to manage your company’s cash flow. Give it a go!

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More From Forbes

14 crucial aspects of a business plan first-time founders often overlook.

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First-time founders of companies are some of the most highly motivated people out there. Most are hyper-focused on succeeding and have big ambitions for their business. Some new founders may overlook critical aspects of their business plan, however, which could result in issues that are difficult to resolve later.

Here, 14 members of Forbes Coaches Council share important things first-time founders commonly forget to include in their business plans. Knowing what these elements are in advance can help them ensure their plans are solid and thorough.

Forbes Coaches Council members share important aspects of a business plan that first-time founders commonly overlook.

1. Their Overall Vision For The Business

One crucial element that I’ve seen first-time founders forget is their overall vision for their firm. All too often, they are caught up in the finances, action steps and goals, which are important. However, the ability to effectively communicate the vision to your clients, your team and yourself allows you to stay connected to what it is you value and keep everyone on track should they get lost along the way. - Bryan Powell , Executive Coaching Space

2. A Well-Explored Value Proposition

First-time founders often neglect deep exploration of the company’s value proposition. A focus on finding a scalable value proposition is at the core of a successful business plan. You can master the value proposition by visualizing, designing and testing pain relievers and gain creators for target customers. As the key foundation of the business model, well-explored value helps to solve the right problem. - Daniel Hooman , Agile Partners

3. Needed Investments In Skill Development 

Often, first-time founders forget to include the very crucial investments they need to make in their growth mindset, communication skills and leadership strategies in their business plan. Because business plans are designed to focus mostly on the tangible parts of the business, skill development is an easy miss. And ironically, investing in the intangibles always brings in the highest ROI. - Shiny Burcu Unsal , Academy of Neuro-Shine Technology

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4. An Appropriate Marketing Budget

Dedicate an appropriate amount to the marketing budget in your business plan. Embracing the idea that you can sufficiently market your business using only “free” and/or social media resources is often a big mistake. - Donald Hatter , Donald Hatter Inc.

Forbes Coaches Council is an invitation-only community for leading business and career coaches. Do I qualify?

5. Accounting For Unanticipated Risks

Unanticipated risks can stump any founder. While motivated and skilled in what will bring success, founders often have a blind spot for complications or hurdles. I suggest that their most frequent questions should be: “What am I missing?” “What will stop us?” “What was unexpected for you?” Seeking broad perspectives on potential risks can equip a founder for success. - Marita Decker , FutureCourse Education

6. A Plan In Case Of Failure

What will you do at the first sign of failure? All businesses face challenges, and for first-time founders, even considering failure may feel taboo. However, it can be a strength. Including it in a business plan reflects grit, resilience and reality. Calling it out by saying, “Here is where this may go wrong,” and, “This is our plan if and when it does,” reflects depth of analysis and conviction of vision. - David Yudis , Potential Selves

7. Detailed Marketing And Sales Strategies

Optimistic sales growth expectations without detailed, “how-to” marketing and sales execution strategies and tactics can derail the best business plan. Don’t just look at multiple revenue scenarios, but dive deeper into the assumptions that drive your revenue projections. Assess the resources allocated to meeting your targets. Understand the correlation between the two to give credence to your plan. - Yamini Virani , Celebrus Business Strategies

8. A Clear Definition Of The Customer Base

They often forget to do the work to define who their customers are and what those customers’ needs, pain points and problems to solve are. Sure, they often give that lip service, but have they truly done the research and the listening required to address the problems the business will solve for customers? I’ve witnessed too often that they are finding customers for products, not products for customers. - Annette Franz , CX Journey Inc.

9. Reasons Why Investors Should Invest

Usually, founders creating business plans attempt to be as comprehensive as possible. One thing I often see them miss is the “why” at the end—why investors should invest in them. Incorporate a summation of the numbers, the culture, the project, the market niche, the growth potential, how nimble management can be and so on, into a simple, cogent and compelling summary. - Ash Varma , Varma & Associates

10. A Call To Action For Investors

A call to action at the end of the presentation is better than a “thank you” slide. Ending on an ask allows the founder to perhaps ask for another meeting, ask the attendees to do additional research on their own, or ask about other investors who might be interested. After you have created awareness for your new startup idea, give the investors a key task to work on in order to keep them interested. - Kelly Huang , Genesis Advisers

11. A Strong Employee Value Proposition

Most first-time founders don’t put enough time and attention toward the people-management issues of the organization. If you want to establish a people-centric organizational culture, you need to start from the beginning with a clear vision, mission and sustainable organizational structure. Create a strong employee value proposition to drive individual, team and organizational success. - Jonathan H. Westover , Utah Valley University & Human Capital Innovations, LLC

12. The Cost Of The Founder’s Personal Effort 

The amount of personal effort that a founder will be putting into the process is often underrepresented in a business plan. As a result, costs of doing business are understated. Assign a price to what your time and effort will be in the process and incorporate it into your business plan to get an accurate picture of what your margins will need to be to achieve your desired revenue and profit targets. - Arthi Rabikrisson , Prerna Advisory

13. Contingency Plans For Slow Growth

First-time founders are often so convinced that their business concept will “take off” that they fail to plan for slower growth. They fill their business plan with the most optimistic forecasts for growth and scaling, but they fail to build out contingency plans for slower growth patterns. - Billy Williams , Archegos

14. A Roadmap Of The Journey Ahead

Attracting and retaining the right people is vital. In order to do so, first-time founders must have an engaging story that communicates their purpose, their vision for the project and what the roadmap looks like for the journey ahead. The best talent, partners, investors and clients all want to connect, understand and feel that they are a part of the journey. It’s all about hearts and minds. - Luis Costa , Luis Costa - coach · facilitator · speaker

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First and foremost, the business plan is aimed at:

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