How to write a business plan in 5 steps
UPDATE: This how to write a business plan post was originally published on 4 April 2019 and updated on 14 January 2021.
Whether you’re running a single-person business or a global corporation, a business plan is essential. It’s basically a blueprint for your business and provides direction, helps you stay focused, and assists in creating strategies to achieve your goals. To help you get started, here is an easy step-by-step guide on how to write a business plan that works for your business.
While writing a business plan might seem like a big job, it really doesn’t have to be. Contrary to what many people think, a well-written business plan doesn’t have to be long and arduous. In fact, you should try and keep it short and to the point.
Your business plan will help you understand your:
- Target market.
- Strengths and weaknesses.
- Strategies to secure external funding.
- Direction and structure.
Your plan will constantly be changing and evolving, so try and not sweat the small stuff when you initially start creating it.
Related: Business strategy 101 — success comes to those who plan
How to make a business plan
Don’t worry if your plan is ugly at first — the important thing is to start. It’s as simple as following these five steps:
Step 1: Do your groundwork
Before you even start writing your business plan, it’s important to do your research and gather together all the necessary information you’ll need. This will make the whole process a lot more painless. It will also give you a clear idea on how to structure your plan.
Put aside some time to research everything about your business, product, competition and market.
To get the ball rolling, ask yourself these questions:
Who are you writing it for?
Decide if your business plan will be an internal document or if others such as loan officers or potential investors will receive it.
What kind of information will be effective?
There’s no one-size-fits-all equation, although it’s a good idea to combine clear, concise writing with visual elements like product sketches and financial projections.
What goals do you want to achieve?
By determining your goals before you start writing your plan, you are able to decide what type of information will help you in achieving these milestones.
When the time comes to start writing your business plan, you should try and be as clear and concise as possible as you fill out each section. Need a little help getting started? Here are a few free resources for business plan formats, templates and samples:
Use one of these templates to lay out your plan.
Step 2: Introduce your business
The next step in how to write a business plan is to create a company profile that clearly outlines your business and what you are offering. This should include a brief company history, your target audience, resources and what makes your business unique.
If your business plan is going to be reviewed by people outside the company, this is your first chance to give someone a good overview of your business. Try to avoid sounding too “sales-y” in this section, as this isn’t the purpose of a company overview. Instead, try and set up a good platform for the rest of the business plan so the whole document flows seamlessly.
Step 3: Understand your market
You already should have done a huge amount of research before you started writing your business plan, so this section should be a piece of cake.
A thorough market analysis shows that you know your industry inside out, and that you have measured your business up against the competition.
Outline your marketing strategy clearly and use any relevant data to support each point that you present. This is especially important if you’re using your business plan to seek financial support, as investors need to be convinced that they’re going to make money.
Related: Learn how to create a buyer persona
Step 4: Make a list of milestones
This is one of the most useful sections of a business plan, and is an effective way to create a clear direction for your business.
Create a list of realistic goals you’d like to achieve in your business, along with how you’re going to achieve each goal and when you want it completed. If you have a team of employees, you should also add who will be responsible for overseeing each goal.
By setting deadlines and crafting a strategy to execute each goal, you are proving that you have established a long-term plan for your business.
Step 5: Present a financial forecast
This is where figuring out how to write your business plan gets a bit more technical. Whether your business is big or small, it’s important to include a glimpse into your finances for both internal and external purposes.
As a business owner or manager, including a financial forecast provides a set of metrics you can measure up to in the future. It establishes a good baseline against which you’ll easily be able to track your revenue in the coming months.
This section gives potential investors a comprehensive view of your business and how it has been performing.
There are five important things to include in your financial forecast:
- Key objectives and financial review
- Startup costs (annually)
- Balance sheet forecast
- Expected cash flow
- Break even analysis
Get details on each of these elements here.
How to write a business plan in summary
Once you’ve finished writing your business plan, schedule time each quarter to go back and review it. This will allow you to make full use of what your business plan has to offer. Measure your successes and/or downfalls and figure out what changes you need to make to overcome any challenges your business is facing.
Learning how to how to make a business plan doesn’t have to be stressful. In fact, it can be done in five simple steps.
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