hether you’re just starting out or you're years into operating your business, a business plan is one of the best ways to clarify the long-term vision you have for your business. Creating a business plan enables you to organize all of your business goals, objectives, structures, and ideas in one centralized place.
Not every business plan looks the same, but several key elements to consider when developing your business plan will benefit you and your business in the long run. Follow this step-by-step guide to writing an effective business plan for your small business.
How to Write a Business Plan in 10 Steps
1. Create an executive summary
The first step in building an effective business plan is creating an executive summary. Think of an executive summary as your company's elevator pitch in written form. You'll want to keep it brief yet convey the essentials of your business. It should include your mission statement, a concise description of products or services offered by your company, the ownership structure, and an overall summary of your business plan.
2. Write a company description
You also need to include a company description, which is precisely what it sounds like. This document will include pertinent details about your company including the company name, physical address(es), key staff members, and notable details from its history.
The company description is your chance to expound on your business, company objectives, target audiences, pain points your company solves, and how your business stands out from your competition.
3. Conduct a market analysis
One of the most important steps in building a business plan is analyzing the market. Without a market analysis, you'll have a hard time understanding your industry, your target market, or how to stand out from your competition.
Start by performing comprehensive market research for the market your business is entering. Regardless of your company size, understanding the trends and opportunities within your market enables you to build a more effective marketing plan to grow your business. Market research includes everything from demographics to consumer behaviors. This analysis might also help you find potential customers or new products you could offer.
Performing a market analysis also gives you a chance to research your competitors: understand their strengths and weaknesses. Look at how they are growing, changes they're making, and areas of struggle that you can take advantage of in the market to write up a competitive analysis.
4. Outline your business structure
Your business plan needs to include a layout of your business structure. Creating an organizational chart gives you a visual overview of your company. List your company leadership and other key personnel and their roles and responsibilities. Don't forget to include the company hierarchy in your organizational chart.
5. Define your products and services
This section is your chance to go into more detail about the products and services you offer. When listing your products and services, include information about the production process, the resources required, how you fund those purchases, pricing, and other pertinent details.
6. Write out a marketing and sales plan
It's not enough just to sell products or offer services. You need to market your business. Your marketing and sales plan doesn't need to be a full-fledged marketing strategy, but it should answer who you're trying to sell to and how you plan to target them. What platforms or marketing strategies will you employ to reach your target audience? What is your budget for marketing costs?
You should also include a high-level overview of your company's sales plan. A sales plan should include details on your sales process, as well as your sales goals and steps to achieve those goals.
Think about what success looks like for your company regarding marketing and sales. Include details on how you plan to achieve success through your marketing and sales efforts.
7. Gather your business financials
Your business plan should also include your company's financial information. Information to include in this section includes:
- Income statements
- Profit and loss statements
- Cash flow statements
- Balance sheets
- Business costs (production, labor, manufacturing, personnel, marketing, etc.)
Most of these documents can be produced using spreadsheets, but accounting software is also a helpful tool to organize your company's financial information. Ideally, your accounting software will work with your small business checking account. Novo offers integrations with software like Quickbooks and Xero, making finding and connecting your financial information across platforms simple and easy. You can sign up for a Novo checking account here.
8. Outline your financial projections
Your business financials section lays out your company's past and current performance. You can also include a roadmap that dives into financial projections for your business. This is especially important if you're seeking funding from investors.
When writing out financial projections, include charts and other visuals to reinforce your company's vision. Aim to project your vision out for at least the next five years to give a clear picture of where your business is headed. Be realistic with your projections, too. Provide supporting materials and context for your financial plan.
9. Write out your funding request
If you seek funding for your business, include an outline of any funding requests and requirements. Provide details on why you are requesting funding and what the funding will be used for. Clearly lay out terms and conditions of funding and the type of funding required.
10. Create an appendix
The last section of your business plan is the appendix. The appendix includes supporting documents and additional information not listed elsewhere in your business plan. Documents to include in your appendix include:
- Bank statements
- Business credit history
- Legal documents
- Letters of reference
Consider including a table of contents to help keep the appendix organized.
Whether you’re embarking on a new business venture or looking to grow your existing business, be sure to create a business plan. Take time to review your business plan annually and make changes as your needs and goals change. Creating an organized infrastructure of business documents now will help your business run more smoothly. And if you have employees, it can keep your team on the same page long term.