In this ultimate guide, you learn how to write a business plan you’ll actually use.
- A simple process to create a stand-out business plan.
- The most important elements of a business plan.
- How to research your business plan.
- How to write your business plan.
- Templates, examples, and much more.
If you want to make sure that you write a great business plan, this guide will give you a lot of value. Read on!
Chapter 1: Business plan fundamentals
Let’s start by establishing what a business plan is.
In this chapter, you get a business plan outline.
You also learn how to write a great business plan, and much more.
Let’s dive in.
Business plan outline
- Executive Summary
- Company Description
- Product/Service Description
- Market Analysis
- Value Proposition
- Sales Strategy
- Growth Plan
- Management & Staffing
- Financial Summary
What is a business plan?
A business plan is a written document that outlines your business goals. It explains your business and how you’re going to reach those goals.
You might need a business plan for obtaining a loan, receiving funding, or applying for a grant.
But other than that, a business plan is mainly something you create as a roadmap for yourself. It gives you clarity, but no one else will probably see or use it.
The thing is:
You can use your business plan to crystallize your thinking and confirm your idea. Basically, to get started in the best way possible.
That’s why I recommend that you keep it short. It is important to plan for your business. But it’s much more important to get out there and start building your business.
This guide helps to make writing a business plan a simple process.
Steps to writing a good business plan
A great business plan consists of a few things:
- The language is clear and concise. If you’re writing your business plan for yourself, a few pages (2-5) is more than enough. If you’re writing it for a more official purpose, 15-20 pages will usually do.
- Your audience’s needs and wants. Your business is built to address your customers’ problems, so your business plan should be written from your audience’s perspective.
- Research. Your business plan should build on research and not your own assumptions.
Chapter 2: How to do market research for your business
In this chapter, we’ll look at the research you need for your business plan.
You see, you need to understand your market to write a great business plan.
And for this, you need to do market research.
Let’s find out how you do it.
Why do you need market research?
A lot of failed businesses have one thing in common.
They didn’t research their market.
Market research essentially means that you research your audience of potential buyers. You get to understand why they want your product or service.
Plus, if you’re just starting your business, market research can quickly help you get your first clients. That’s because during your research, people might get interested in working with you.
Most importantly: It helps make your business plan incredibly valuable, so that you’re one step closer to a successful business.
How to do market research
There are a few ways to do market research.
The first one is online research.
Look for information on your service or product and audience.
First, look for information on pricing and positioning.
What are similar products or services priced at? Who is their target audience? How do they speak about their product?
And look at what potential audiences are saying about those products and services.
For example, Amazon is a great resource because there are so many books and products with reviews by people who might be in your target audience.
Another site with plenty of reviews is the software review site Capterra.
Also social media groups like Reddit and Facebook groups include a lot of information on what products and services people want to pay for.
For example, I started my first online business, an advertising consulting business because I noticed that business owners were talking about this need in Facebook groups.
The next step is to interview people.
For example, you can ask people in social media groups to jump on a quick call with you. In exchange, you offer a free consulting call or similar.
But what should you ask your interview subjects?
Check out this video where I talk through what you should be looking for:
Other than that, the questions you need to ask are:
- “What is your biggest challenge related to ___?”
- “What is your goal for ___?”
- “Would you be willing to pay for ___? How much would you be willing to pay to make this problem go away?”
When you’ve talked to 3-5 people, you’re ready to start writing your business plan.
Chapter 3: How to write a business plan
In this chapter, we’ll look at how to write a business plan.
Again, your business plan shouldn’t be too complicated. (That’s unless you need it for a specific reason, like getting funding. In that case, your business plan should follow the funding source’s requirements.)
Here’s how to write a simple business plan.
An executive summary is a summary of the rest of your plan. That’s why you can leave writing it to the end. Your executive summary should be one page, at most. It includes a high-level overview of:
- Your business concept. What does your business do?
- Product or service. What do you sell?
- Business goals. What are your long-term goals?
- Market. What does your market look like? Your competitors?
- Customers. Who do you sell to?
- Value proposition. How is your business different from what already exists?
- Scope of business. How big can your business get?
- Business model. What does your marketing look like? Your revenue model?
This section is all about understanding what your business is.
These elements should be included in your company description:
- Your business structure (Sole proprietorship, limited partnership, incorporates company, or general partnership)
- Your industry
- What you’re selling
- Your long-term plan (Do you plan to keep your business or sell it?)
- Your vision, mission, and values (Why does your business operate?)
- Short-term goals (the next year) and long-term goals (the next 1-5 years)
- Your team
Product or service description
Is your product or service ready for the market now? For example, if you sell products in an online store, you first need to develop your product and build an inventory.
But if your business is service-based, your service is ready now. This includes coaching and consulting businesses.
Also, explain your pricing strategy. How much will your products or services cost? What pricing model do you use (monthly billing, per-product price, or something else)?
In this video, I give my best pricing recommendations:
And finally, does your product or service come with any intellectual property considerations? Is there a risk that you might be infringing on someone’s IP rights?
A physical product might come with these types of considerations.
On the other hand, a service-based business doesn’t come with many potential IP rights violations because you’re selling a more generic service.
(That’s not to say coaching program names and similar can’t be protected, even if the service, like health coaching, can’t. Note that I’m not a lawyer and these tips aren’t meant as legal advice.)
Your market is crucial for your business success. By choosing a market with plenty of customers who need your product or service, you’re setting yourself up for success.
Remember how we talked about research in the last chapter?
This is where you’ll use that research to understand why you customers want to buy from you.
Your customers are at the core of your business.
Most customer persona guides tell you to list your customers’ demographics:
- Where they live
But by now, you know that customer research is so much more than that. Use your customer research (which we looked at in Chapter 3) to dive deeper and understand the psychographics of your target audience.
What language do they use to describe their needs and goals? For example, a 60-year old executive will talk very differently about her health goals compared to a 25-year old.
Ask yourself (and answer these questions with your market research):
- What is the problem my customer wants to solve?
- Why can’t my customer solve this today?
- What’s the measurable outcome my customer wants to achieve?
How big is your potential market? Check for trends and trajectories in your industry.
For example, as the boomer generation continues to retire, industries for retirees will continue to grow. If you serve that market, you should mention this in your business plan so you can take that into account when thinking about your business’s long-term goals.
You can get this information from:
- News outlets.
- Governmental statistics offices.
- Academic research.
With a SWOT analysis, you analyze your strengths, weaknesses, opportunities, and threats.
Most importantly, remember that you never have perfect information. You will need to operate with some assumptions. So ask yourself what assumptions you have that, if proven wrong, would cause this business to fail.
Take these into consideration in your SWOT analysis.
The next step is to look more closely at your competition.
Research your competition with Harvard professor Michael Porter’s Five Forces Framework in mind. This model builds on five forces to determine the competitive intensity and the attractiveness of an industry in terms of profitability.
An industry with intense competition won’t have incredibly profitable businesses. But industries with mild competition (most coaching and consulting industries) have room for high returns.
The five forces are:
- Threat of new entry. How likely is it that new businesses will enter your market? For example, airlines don’t see a huge number of competitors because airlines need money and infrastructure to get started. But people will start online businesses (physical products, coaching, or consulting) much more easily.
- Buyer power. What buying power do your customers have? If you sell coaching to executives, you will likely have customers with better buying power than if you sell coaching to unemployed people.
- Supplier power. How many suppliers are there on the market? If there aren’t that many, you might face high prices, which eat up your profitability.
- Threat of substitution. How likely is it that your product or service will get substituted by a low-cost, better alternative? Generic products will easily get substituted, but businesses that build a strong brand won’t. For example, think Apple iPhones.
- Competitive rivalry. How can you distinguish yourself from your competition, so that you don’t have to directly compete with anyone? You can do this by serving a specific group of customers, distinguishing yourself from the competition with marketing, or establishing technological leadership.
One of the main reasons 20% of small businesses fail within their first year is because they don’t understand their value proposition. Make sure you get this right in your business plan.
The thing is:
Your value proposition helps you understand how you’re going to stand out.
You can build your value proposition on Michael Porter’s Generic Competitive Strategies.
These include three different factors:
- Cost Leadership. You become the low-cost business in your industry. This usually requires scale, proprietary technology, access to raw material, or something else. For example, think about how Amazon uses technology, infrastructure, and scale to drive down prices.
- Differentiation. Your business stands out by being unique. You position yourself to meet customers’ needs. This means that you can ask for a premium price for your services. For example, my client David is a health coach who helps people lose weight with the help of herbs, a very unique way to position a health coaching business.
- Cost Focus or Differentiation Focus. Your business focuses on a specific niche and differentiates itself either by serving a specific target market need or a target market cost behavior.
For example, I started my current business when I realized that there wasn’t a great product for employees who wanted to quit their jobs and become entrepreneurs. I used differentiation focus to target a specific segment within a competitive market (business coaching).
This chart should help you answer two questions:
- Who is your target customer?
- How are you different from the competition?
Your operations plan outlines the workflows you’ll need to implement to make your business work. In terms of a physical product, this includes suppliers, logistics, inventory, and more. You’ll also need a contingency plan in case anything goes wrong.
In terms of a service-based business, you don’t need to put too much energy on your operations because all you need is yourself and your laptop.
Your marketing plan shows how you’re going to spread the word about your business now and in the future. Focus on where your clients are hanging out, whether that’s on Instagram, Facebook, or somewhere else.
Your marketing strategy should answer these questions:
- What is the pricing of your product or service? Why did you choose this price?
- How do you promote your business?
- What are you selling and how is that different from other existing products and services?
- Where will you sell your products and services?
Next, share your sales strategy. This is the process you undergo when you sell to your customers.
It covers all activities that lead up to a sale. Your sales cycle could look something like this:
Facebook ad → Lead subscribes to your email list → Lead reads your emails → Lead buys from you
What will your business growth look like? How will you make it happen? Your growth plan should be specific and realistic. Define the exact steps you’ll take to grow your business.
Management & staffing
What does the management of your business look like? If you’re starting a business on your own, you’re the CEO and you don’t need to include anyone else here.
Will your business employ a team? Or at what point will you start hiring people, if at all?
If you’re unsure, I share advice on hiring in this video:
Your financial plan builds on your income statement, balance sheet, and cash-flow statement.
Income statement: Where do you get your revenue and what are your expenses? With this information, you can make a profit-and-loss calculation.
If you haven’t made any sales yet, you can work with estimates. Remember that people are less likely to buy in the beginning when you don’t have testimonials and you’re new to sales. That’s why I recommend estimating that one out of every ten sales calls will convert.
Cash-flow statement: Your cash-flow statement is just like your income statement, but it also takes into account when revenues are collected and expenses paid. If you get more money in than is going out, you have a positive cash-flow statement.
Balance sheet: List your business assets or what you own (if you have any) and what you owe. By deducting liabilities from assets you get your business’s shareholder equity.
Also ask yourself: What’s the biggest risk to your financial viability?
For example, let’s say you’re a health coach who teams up with a local gym to provide their members with health coaching. Your biggest financial risk (assuming this was your only client acquisition strategy) would be that the gym went bankrupt.
Knowing your risks upfront means that you can prepare for them. And by including these in your business plan, you are clear on your risks and your planning for those risks.
Need a way to set up your financial plan for your business plan? Copy this simple financial tracker that I created for you and calculate your own business income.
Chapter 4: Business plan template
This chapter is all about using what you’ve learned so far.
First, you get a fillable business plan template.
And second, we’ll look at a business plan example.
Let’s dive right in.
Business plan template
The simplest business plan format? A Business Model Canvas.
The Business Model Canvas was first developed by Alexander Osterwalder in 2005. This is a visual chart of your business plan that includes nine ‘building blocks’. You can either use it as your business plan or use it to structure a longer business plan. Either way, use what you’ve learned so far in this guide to fill in the sheet.
Then, use your answers to fill in your own Business Model Canvas.
Business plan example
Not sure exactly what your Business Model Canvas should look like?
Chapter 5: Helpful resources
Starting a business is so much more than creating a business plan.
A business plan will help you put your idea on paper.
But that’s when the real work kicks in.
These resources will help you write your business plan and start your business.
Let’s take a look.
Start a business resources
“Start Your Own Business” – USAGov
“Talking to Humans: Success Starts With Understanding Your Customers” – Giff Constable
“Your Strategy Should Be a Hypothesis You Constantly Adjust” – Harvard Business Review
“The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It”, Michael E. Gerber
Legal resources to start a business
“Register Your Business” – US Small Business Administration
“Starting a Business: License and Permit Checklist” – LegalZoom
“Business Structures” – IRS
“Fund Your Business” – US Small Business Administration
“Government Small Business Loans” – SBA.com
“Finance Your Business” -USAGov
Marketing and sales resources
“Sales: A Guide for the Small Business Owner” – US Small Business Administration
“How I Learned to Sell (Strategies for Business)” (YouTube)
Over to you!
There you have it. Now you know how to write a business plan.
I’d love to hear from you:
How will you write your business plan?
What are you going to focus on first?
Let me know in the comments below!