How to write a business plan and why you need one
- Business plans help your team get more strategic and proactive about working toward your goals
- Traditional business plans are highly detailed and necessary for getting outside funding
- Lean startup business plans help you get into action faster, while still reflecting on the most crucial topics of your business
Running a business isn’t always easy. However, business planning can help light up your path to success and reduce the number of surprises lurking ahead. Learning how to write a business plan can guide your team to act smarter, maximize your growth potential, and open up new funding opportunities. Learn more about why you need a business plan and how to create the right one that best suits your needs.
Why are business plans important?
A business plan serves as a roadmap for your company’s future—and paving that path for growth is often the best way to survive (and thrive).
The dismal truth is that only 50% of businesses survive their first five years and only 40% of existing small businesses make a profit. But having a five-year business plan can help you beat the statistics. A well-researched plan gives your team some foresight on the essential actions and milestones for reaching your goals. If you’re not hitting milestones, you’ll have an idea of where adjustments need to be made.
Business plans push your team to think strategically and proactively, so you’re not simply responding to trends in your market or what your competitors are doing. You’ll have a clear picture of your niche, sales and marketing strategy, and other crucial factors to help you stay ahead.
If you’re seeking outside funding from investors or lenders, or looking to partner with local business owners or suppliers, a business plan is a must. These people will want to know they’re working with a company that has a clear, long-term vision—especially if you’re a new business with few or no financial statements (like balance sheets and cash flow statements) to prove your success. Learning how to write a business plan can help you prove you’re here to stay.
How to write a business plan
So how do you actually write a business plan? There are a number of methods, but most companies stick to one of two types of business plans: a lean startup plan or a traditional plan.
Lean startup business plan
You don’t necessarily have to learn how to write a business plan the traditional way if your main goal is to get your company up and going fast. If you’re not seeking funding and your company isn’t complex, a lean startup plan may be perfect for you. For example, if you’re opening a small coffee shop or getting started as a general contractor with no employees, this could be the best option.
Most companies that choose this route use this business model canvas to break down their plan visually into nine key aspects of business development. It focuses on the must-knows of your business planning, so you can start selling quickly and focus your time on other important tasks, like developing new products or engaging with potential customers.
Here’s what each section of the business model canvas means:
- Key partnerships: The other businesses—including suppliers, contractors, and manufacturers—that you’ll partner with to operate.
- Key activities: What you’re doing on a day-to-day basis to serve your customers, such as making sales calls or doing consultations.
- Key resources: Your most important assets. This includes the employees, technologies, patents, and more that you put into action each week.
- Value proposition: What you uniquely do for your target market. This explains why your potential customers will care.
- Customer relationships: What your relationships with your customers will look like, including how personal they will be (in-person or virtual) and if you want to focus more on long-term or short-term relationships.
- Customer segments: The people who are included in your target audience, segmented by their demographics, interests, and more.
- Channels: The specific channels you’ll use to engage with leads and customers, such as email or direct mail.
- Cost structure: Whether you’ll be cost-driven (decreasing expenses as much as possible) or value-driven (providing the greatest value for customers) and what major costs you’ll encounter, including rent, salaries, and inventory.
- Revenue streams: How you’ll price your products or services and how that pricing will impact your net profits.
Traditional business plan
While the traditional business plan takes a significant amount of effort (they are incredibly thorough compared to the lean startup plan), it’s an excellent way to gain highly detailed insight into your own business. The average suggested length is 30–50 pages long, and this comprehensive document will ensure that your team members have a strong point of reference when making any business decisions.
This type of business plan is essential if you’re seeking funding from bankers, venture capitalists, angel investors, and more. Since their money is on the line, they want comprehensive details about your business planning so they can get a sense of your viability.
Here’s what a traditional business plan template includes.
1. Executive summary
This small section of your business plan is like a first impression. It affects whether your audience continues reading or not—which means it can make or break your outside funding opportunities.
An executive summary should be an engaging, one-page snippet that gives readers a compelling introduction to your company and why your business idea has the potential to succeed. It should include a basic overview of your business, the products or services you offer, what your financial projections look like, and your mission statement.
While your executive summary appears at the beginning of your business plan, write this summary last, after you’ve already conducted all your research. There’s no need to get too deep into the nitty-gritty with your executive summary—that’s for the rest of the plan.
2. Company description
This section goes into detail about what your company does. In your company description, you want to highlight the problems your target market faces and how your product or service offers a solution. Explain what gives you a competitive advantage, whether it’s your product quality, experience, or something else. Hone in on what makes your business unique, valuable, and exciting.
3. Business and management structure
Whether it’s your employees or potential investors looking at your business plan, your readers will want to see how organized and competent your company is. Use this section to clarify who owns your business, including all stakeholders, and who’s on your management team. Create a visual organizational chart on a platform like Microsoft Office or Canva to make things easier for your readers.
You’ll also want to explain your company’s legal structure (LLC, C corporation, etc.)—which affects how your company is taxed and what you’re legally responsible for—since this can affect your funding opportunities. For example, banks and investors are less likely to work with sole proprietorships, in part because they’re seen as high-risk.
4. Products or services
In this section of your business plan, you can provide a more thorough explanation of your individual products or services. Instead of offering surface-level information about what you do, dive deeper into the details. For example, if you have an auto repair business, you may include separate subsections about your body repair, glass repair, and diagnostic services.
This is also a great place to mention any intellectual property you hold, like copyrights and trademarks.
5. Marketing plan
When you write business plans using the traditional method, you’ll need to formulate a strong marketing strategy to show which actions you’re taking to make sales. Determine where you’ll successfully reach your target market. Consider what social media channels you will use. Decide if you’ll interact with leads and clients via text message, over the phone, or through your Yelp Business Page, and if you’ll run ads on search engines or traditional print channels.
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You’ll also want to research and include details about your industry outlook and competition. Demonstrate that you’re aware of trends, opportunities, and challenges—as well as how to overcome those challenges through your strategy—by including a strong market analysis.
6. Financial analysis
Finally, you need to talk about numbers in your business plan. To show your ability to maintain long-term financial health, it’s crucial to provide a positive (and realistic) picture of your future growth. Include details about your projected sales, expenses, and profits. Take time to do this analysis, consulting with a professional if needed, so you and your readers can understand your full growth potential.
If you’ve been in business for at least a quarter or two, include any financial statements you have to back up your claims.
It’s time to build a successful business plan
When you understand how to write a business plan, you’ll be better equipped to achieve profitability and customer loyalty, so you can grow in the long-term. Your template may look different depending on your business needs and goals, but no matter which type of business plan you choose, you’ll be creating a guide that allows for better decision-making and focus within your team. The next step: Consider more business growth strategies that you can implement.
The information above is provided for educational and informational purposes only. It is not intended to be a substitute for professional advice and may not be suitable for your circumstances. Unless stated otherwise, references to third-party links, services, or products do not constitute endorsement by Yelp.