UPDATE: This article on how to write a business plan was first published on 26 March 2019 and updated 8 July 2022.
Starting a business? Then you’ll need to know how to write a business plan.
A business plan maps out your sales goals, operating methods and financial setup. It will not onlly guide you but make it easy to apply for grants or loans.
Seems easy enough, but how exactly does a person who has never owned or operated their own enterprise even go about creating a business plan?
How do you make the leap from having a great business idea to getting your facts and figures down on paper?
And where do you even get realistic facts and figures from? Shockingly, it’s not as hard as you think!
If you’re already at the point where you understand that a business plan is your next logical step, you definitely have a business development and forecasting mindset — you just may not realize it!
Now think …
- Do you spend your free time trying to figure out the optimal price point for your product or service?
- Have you pictured yourself displaying your wares at farmers’ markets?
- Can you create agendas for fantasy staff meetings in two minutes or less?
If you can say yes to any of these then you have already begun to formulate a business plan in your mind. And an actual business plan is created by writing out the steps necessary to get you out of your dreams and into the real world of commerce.
The 6 sections every business plan should have
Business plans are worth the time you spend on them for lots of reasons. Here’s what to include in yours.
- Executive summary
Now let’s dig into what to describe in each section.
1. Executive summary
This section is where you sum up the essence of your company for investors and lenders.
“The executive summary should provide a quick overview of the problem your business solves, your solution to the problem, the business’s target market, key financial highlights, and a summary of who does what on the management team.” says Tim Berry, the author of Lean Business Planning.
Because the executive summary relies on what’s in the rest of the sections, many people create the other sections first and then write the executive summary.
Related: How to start a business in Canada
Creating a good business plan means doing research on your competitors and the marketplace you will be entering.
It’s not enough to say “there aren’t enough poutine trucks in this part of town.” You need to actually determine if this is true. Read this post to learn how to do market research.
Your goal it to find a problem that your company can solve with its products and/or services. Once you’ve found one you want to solve, state it clearly here.
- How many poutine trucks serve this part of town?
- How busy are they?
- Are customers satisfied with what they’re getting from the current trucks (price, service, quality, etc.)?
- Is there demand for a variation/other type of food that’s not on offer?
This section is where you get to spell out in detail the present and future conditions of the market for your business.
Is a Canvas business model a business plan?
Some people find that using Alexander Osterwalder’s Canvas tool can be helpful for planning purposes. It provides a helpful template for identifying, describing or developing business models (how a company is set up to run).
While completing a Canvas outline can help you think through your business model options, a Canvas business model template cannot take the place of an actual business plan.
Related: Selecting the right business model
This section describes how you will turn your marketplace opportunity into a functioning business. Be sure to include:
- How you plan to get customers. Learn how to set sales and marketing goals here.
- The general operating procedures of your company, including where you’ll get supplies, how you’ll store inventory and how you’ll distribute your products.
- Measurable milestones you expect to reach, such as number of units sold, manufacturing agreements made, etc.
It is also important to describe the metrics you will be watching to mark your company’s progress over time.
Great companies are run by great teams, and this is the place to list members of your team along with the skills and experience each brings to the table.
If additional team members will be needed, be sure to provide a brief summary of the positions and general responsibilities you will be hiring for in the future.
You should also include the legal structure of the company — sole proprietorship, partnership, etc. — as well as its location and history in this section.
In his article, What is a Business Plan, Tim Berry explains “…a solid financial plan helps you figure out how much capital your business needs to get started or to grow.” Typical financial plans include a:
- Sales forecast
- Personnel plan
- Profit and loss statement
- Cash flow statement
- Balance sheet
The bottom line that determines the success or failure of a business plan is whether it includes realistic financial information.
Many new entrepreneurs are often scared off by trying to predict financial information using accounting concepts they may have little or no knowledge of.
If these are areas you have little experience with, you can always hire out this portion of your business plan to a financial professional. They can work with you to determine the appropriate financial information for your business plan.
Guessing at startup costs
It’s super important to understand how to figure your startup costs. Be sure to stay realistic in your financial projections and conservative in your estimates. If you’ve only sold a few of your products or have been paid for your services only a handful of times, you may want to wait a while and gather more information about your sales trends.
It may take up to several weeks or months to get a practical handle on how often your sales occur and the circumstances surrounding them.
- Was your biggest financial success to date at a fair, convention or other in-person sales event?
- Do you sell exclusively online, whether via social media or a website?
- Do you have a permanent or a pop-up location to operate out of?
This type of information will shape much of your financial projections once your basic running costs have been figured out.
Many new entrepreneurs ask, “How do I write a business plan without financial info?”
A great way to figure out your financials without any real-world data of your own, is to research your direct competitors large and small, and try to get a rough idea of their sales, mark-ups, number of employees and overhead, etc.
Many larger companies have year-end financial reports that are made available to shareholders and are sometimes published online, providing a wealth of data for new entrepreneurs to learn from. Owners of smaller companies (who aren’t direct competitors) might be willing to share this information if you ask them.
This way, you will at least have a ballpark idea of the figures you will probably be dealing with in your own venture.
The Appendix provides space for detailed product depictions, photos and other additional information referred to in your business plan.
Having evidence to back up every claim you make about your company and documenting why your ideas will work shows investors that you have done your homework.
By completing these six sections with the help of a Lean Business Plan, you can reasonably prepare your company for success in the marketplace.
How to write a business plan you’ll actually use
Some of the best advice would be to write your business plan as if you were explaining it to a five-year-old.
Start with the product or service you bring to the marketplace — why it is a good product/service, how it will help people? Does it meet a need that no one else is meeting?
Then move on to:
- Who you anticipate your consumers to be
- How you will sell to them
- Where you will sell to them
- What it will cost you
Then describe who you will need to help you do all of this.
You’ve now described how your company is going to work in simple language and you can move on to detailing what you believe will likely happen in the first year of being in business.
Then think ahead to where you hope to be in year three of running your business and again in year five. Describe all of what you see happening in the future, with:
Make sure to keep all of these written ideas close at hand so you can add them to a business plan template like the one linked below, when you’re ready.
The Lean Business Plan
Having an effective plan is important for your business for three main reasons:
- At the time of startup, creating a plan will help you think through every step you’ll need to take to set your business up.
- It creates an accurate summary that investors or banks can use to make decisions on financing your company.
- Once your business is running, it can be used to guide how you react to changing market trends and opportunities as they arise.
In the past, traditional business plans ran anywhere from 40 to 100 pages and took many months to research and write. Completing these super-detailed reports often meant hiring a professional who might charge thousands of dollars per plan.
Today we have streamlined versions like the Lean Business Plan.
In many ways, the Lean Business Plan accomplishes the same thing as a traditional plan. It’s just an easier way into the process for those who are visually oriented.
A Lean Business Plan is a documented guide map for setting up and running your business. Equally importantly, a Lean Business Plan can be used for securing startup funding, investors or partners.
The plan’s nine squares cover all the business bases:
- The problem the consumer is having.
- A solution that is not currently available (or at least not in the form you propose).
- What makes your product/service different.
- How it will be priced.
- Description of likely customers.
When writing your Lean Plan, Noah Parsons of bplans.com advises, “Keep it short … know your audience … (and) don’t be intimidated.”
Now it’s time to add your simply stated business basics into Lean Business Plan’s distinct sections.
Don’t worry if you start to run into business lingo that you may not be familiar with — this is where Google is your friend. Search and define any terms you don’t understand.
You’ll be surprised to realize that you’ve already described, in layman’s terms, much of what a formal business plan requires.
At this point, anything you didn’t include can now be researched at length and added.
Using the ‘explain like they’re five’ method with a Lean Business Plan can help you easily answer the question of: How can I write a killer business plan in one week or less? This stripped-down version of traditional business plans uses plain, everyday language instead of business lingo. Often this type of plan can be completed in a matter of hours or days.
What are the best resources for writing a business plan?
Start with Google to search and find business plan examples and articles like the one you are reading right now.
HubSpot has a great blog entry documenting 12 different real world business plans of some large companies you will be familiar with. It’s a good place to start researching what parts of a business plan you might feel comfortable writing at first.
Shopify also gives great samples of business plans to help guide you in communicating your vision, including some basic business terminology and its usage.
Plan now to reap the rewards later
Business plans have been around for decades and they remain a valuable tool because they work as:
- An exercise in planning.
- A way to showcase a company’s potential for investment.
- A guide to help a business navigate an ever-changing economy.
While reasonable guesses and your grandmother’s assurances that you will become an overnight millionaire may make you feel good about embarking on a new business, only accurate data will give you useful numbers for your business plan.
If you take your time and think things through to keep your focus clear and realistic, you can move forward with confidence.