Proper business planning is pivotal to your success as a business owner. According to the U.S. Bureau of Labor Statistics, 20.4% of new businesses fail within the first year, and half of all businesses fail within five years. There are many reasons why businesses fail, but two reasons, in particular, are often the culprit: lack of funding or working capital and ineffective business planning. The truth is, these two reasons often depend on one another.
Business plans are comprehensive documents that outline the company, its goals, and its plans for revenue growth. While business plans help business owners summarize their mission and markets, they are primarily used to help secure funding from lending institutions (like banks) and investors. Without a proper, well-written business plan, securing much-needed funding to help a business grow is virtually impossible.
Yet, many entrepreneurs skip or rush this step for a variety of reasons. Mainly, they don’t believe it’s necessary during the early stages and consider business plan development more of a formality than a necessity. However, many investors and banks make their first impressions based on business plans and use these documents to rationalize their decision to fund or not fund you.
Getting started with a business plan can be intimidating, but with the right steps, you can have your business plan ready in no time. Here’s how you can create a business plan for your startup:
1. Analyze Existing Business Plans
Before you start writing your own business plan, it’s beneficial to analyze several business plan samples. You can find dozens of sample plans online, and reviewing them can provide invaluable insights into how to approach your own plan. Take notes and evaluate what different plans have in common. What stands out? What structure do they follow? How do business plans within the same industry differ from one another, and what makes one plan stronger than another?
By assessing existing business plans critically, you’re essentially gaining a crash course in business plan writing. Armed with this knowledge, you’ll feel more confident and prepared as you begin the process of creating your business plan. Additionally, try to put yourself in the shoes of an investor. Would you invest in this company based on the information presented? Why or why not?
2. Download Business Plan Template(s)
Once you have a clear idea of what a business plan looks like, you can download a business plan template to get started. There are many templates available online that can give you the building blocks you need, especially if you’re new to writing business plans. Most templates will follow a structure that investors are familiar with, which makes it easier for them to assess your plan. A standard business plan template typically includes the following sections:
Executive summary
Company analysis
Industry or market analysis
Analysis of customers
Competitive analysis
Marketing plan
Operations strategy
Management team
Financial plan
Appendix
When searching for a template, make sure it caters to your specific industry. For example, if you’re planning to open a coffee shop, searching for a "coffee shop business plan template" will allow you to find sample plans with relevant details. You can use the template’s structure and text as inspiration and modify it to align with your business, streamlining the writing process.
3. Consider Using a Lean Business Plan
If you’re looking for a more simplified approach, a lean business plan might be the right option for you. A lean business plan is a condensed version of the traditional business plan, focusing on key elements such as the value proposition, target market, revenue streams, and cost structure. It’s an excellent option for startups that need a fast, high-level overview of their business. Unlike traditional business plans, a lean business plan is flexible and can be adapted as your business evolves. It also allows you to focus on the core elements that are crucial to your startup’s success, making it ideal for early-stage entrepreneurs looking to stay agile.
4. Start Writing
For many people, writing is the most intimidating part of creating a business plan. However, you don’t have to be a writer to do well in this area. Investors aren’t looking for eloquently written copy; they want simple, concise, factual content. Unnecessary wording and overly descriptive verbiage are no good in a business plan.
When you first start writing, you may come across areas that you don’t feel confident filling out yet. Perhaps because you haven’t done enough market research and are still learning about your target market. Or perhaps you haven’t fleshed out your competitive advantages or collected data from your content strategy.
It’s okay to start writing before you have all your ducks in a row. Write what you can and highlight areas of the plan that require separate tasks to be completed before you can finish writing that particular section.
You can also outsource the writing portion of your business plan to a business plan writer. Keep in mind that if you go this route, there’s still plenty of work for you to do, as you’ll need to be hands-on with the project and work with your writer on a regular basis to communicate the goals of the business. You’ll also need to provide your writer with important company information, including any necessary documents and data to support the plan.
5. Use Project Management Software
Because writing a business plan is such an important project, consider using a project management platform to break your progress into bite-sized, manageable goals. For instance, in the below example, the task for “Write Market Analysis” would have several dependencies/subtasks.
Project management software is also a great way to collaborate with other team members (if applicable) who are collaborating with you on its development. For example, if you have a Chief Marketing Officer, you could assign them any marketing-related tasks and keep track of progress.
This is especially useful if you want to set deadlines and hold you and your team accountable for them, particularly if you need to show your business plan to an investor or bank by a certain date.
6. Write Your Executive Summary Last
Your executive summary is the first section of your business plan, but it should be written last because it summarizes everything you’ve put into the remaining sections. Furthermore, some investors consider this section to be the most important part of a business plan; as the first page, it sets the tone for what’s to come and encourages the recipient to continue reading. Your executive summary should:
- Have a captivating introduction paragraph
- Contain a short statement that addresses your proposal
- Provide a quick summary of the other sections in your business plan
- Outline your solution
Here’s a section of an executive summary for fictional kitchen tech company Culina. After Culina describes the company, they end the executive summary by stating the ask and providing a quick overview of the why.
7. SWOT Analysis for Startups
One essential tool you can use to refine your business plan is the SWOT analysis. A SWOT analysis evaluates the internal and external factors affecting your business by identifying its Strengths, Weaknesses, Opportunities, and Threats. For example:
Strengths: What sets your business apart? What are your competitive advantages?
Weaknesses: What challenges do you face? Where do you lack resources or experience?
Opportunities: What trends or gaps in the market can you take advantage of?
Threats: What external factors could hurt your business, such as new competitors or regulatory changes?
A SWOT analysis helps you think critically about your business and refine your strategies, making it an essential component of a comprehensive business plan.
8. Break-Even Analysis
Another critical financial component to include in your business plan is a break-even analysis. This analysis helps you determine the level of sales needed to cover your fixed and variable costs. Understanding your break-even point allows you to plan for profitability and set sales targets.
To calculate your break-even point, you can use the formula:
[
\text{Break-even point (in units)} = \frac{\text{Fixed Costs}}{\text{Selling Price per Unit} - \text{Variable Costs per Unit}}
]
By performing a break-even analysis, you can understand how much revenue your business needs to generate to avoid losses and start making a profit.
9. Strategic Planning for Small Business
Strategic planning is an essential aspect of creating a business plan. For a small business, this process helps you define your long-term vision, identify opportunities for growth, and determine how you will compete in the marketplace. This is where you’ll lay out your business’s direction and the steps you’ll take to get there.
Vision and Mission: What are your long-term goals, and what is the core mission driving your business?
Objectives: What specific, measurable, achievable, relevant, and time-bound goals will you set to achieve your vision?
Tactics: How will you achieve your objectives? What strategies will you implement?
Evaluation: How will you measure progress and adjust strategies as needed?
Strategic planning ensures that your business has a clear roadmap for success and can adapt to changes in the market.
10. Cash Flow Forecast
A cash flow forecast is an essential tool for managing your business's finances. This forecast estimates how much money will flow in and out of your business over a given period, usually monthly. It’s a critical component of your financial plan because it helps you anticipate periods of cash shortages and plan accordingly.
A typical cash flow forecast includes:
Revenue: Expected income from sales and other sources.
Expenses: Fixed and variable costs, such as rent, salaries, and marketing.
Net Cash Flow: The difference between your revenue and expenses, showing how much cash you’ll have at the end of each period.
By creating a cash flow forecast, you ensure that your business will have the liquidity it needs to operate smoothly.
11. Venture Capital Business Plan
If you're looking to secure venture capital, your business plan should emphasize high growth potential and scalability. Venture capitalists want to see a clear path to profitability and a strategy for growing your business quickly. Focus on the following aspects:
Market Opportunity: Present a large, growing market that your business can capture.
Competitive Advantage: Explain how your business differentiates itself from competitors.
Exit Strategy: Define how investors will eventually see a return on their investment, whether through an IPO or acquisition.
A strong venture capital business plan shows that your business has the potential to grow rapidly and provide significant returns for investors.
12. SaaS Business Plan Template
For software-as-a-service (SaaS) businesses, a SaaS business plan template will help you address the unique elements of running a subscription-based model. Key components to include are:
Customer Acquisition Cost (CAC): How much does it cost to acquire a new customer?
Churn Rate: The percentage of customers who stop using your service over a period.
Lifetime Value (LTV): The total revenue you can expect from a customer during their subscription period.
Scalability: How you plan to grow your customer base and scale your operations.
An SaaS business plan template will help you focus on the metrics that matter most to investors in the tech space.
13. Go-to-Market Strategy
Your go-to-market strategy outlines how you will introduce your product or service to your target market and achieve sales success. Key components of a go-to-market strategy include:
Target Market: Who are your ideal customers, and how will you reach them?
Positioning: How will you differentiate your product from competitors in the market?
Pricing: What pricing model will you use to attract customers while maximizing profit?
Sales Channels: Will you sell directly to customers, or use distributors and resellers?
By developing a clear go-to-market strategy, you ensure that you’re reaching the right customers in the most effective way.
Conclusion
Writing a business plan involves multiple steps and moving parts, but it’s a necessary part of growing your startup company. Much more than a means for funding, business plans can also help you as an entrepreneur by encouraging you to think critically about your business and its trajectory. After you’ve written your business plan, chances are you’ll reference it time and time again (and should update it annually). Ultimately, your business plan acts as the cornerstone of your company.