Our Guide for Founders: How to Write a Business Plan Successfully
Table of contents
Adventurers don’t embark on a journey without charting a path first, nor should you as an entrepreneur found a startup without a business plan. Your business plan is your map, and a solid business foundation is your destination.
Creating a business plan has many components. You’ll need to decide what kind suits your goals, before laying out the steps required to reach completion. To guide you through these high seas, we’ve put together a guide on how to write a business plan successfully, for you to consult so you can chart your path confidently.
Read on to fully understand what a business plan is and why you should create one, which type is right for you, and how to put it together step by step.
How to write a business plan in a nutshell
- A business plan is a document which a founder presents to potential investors and interested parties, to demonstrate the financing and operations of their business venture
- Business plans are useful to both staff and founders, as well as potential investors
- Business plans come in three types: traditional, lean, and nonprofit
- Write your business plan by first putting together and executive summary and business description to establish what you do
- Market and industry analyses will demonstrate your understanding of the competition and potential customer base
- Organisation and management lays out the structure of your business and staff
- Financial projections and funding request sections clarify your financial standing and what kind of financing you require from readers
- The appendix includes any extra documents requested by the reader
- Keep in mind length, audience, and passion when writing your business plan
What is a business plan?
Your business plan is a document that creates a picture of your business. In it you will clarify the kinds of products or services you offer, who is on your leadership board and staff, how you will finance your business, what your daily operations will be, and anything else key to your success.
Visually, you will have the freedom to design your own business plan. Like CVs, there is no one template for a business plan. That being said, There are components you will need to include in the document, and displaying them clearly on the page will inevitably force some recognisable structure into your document.
Why write a business plan?
There are two groups of people for whom you will create your business plan: 1. You and your staff, and 2. Your investors.
For you and your staff
Whether or not you’ll have a staff will not influence your need for a business plan. It just changes how many eyes there will be on it. For yourself, a business plan will lay out in plain terms, soberly and backed up with financial data, all the big plans you have about your venture’s success.
As you begin to put down on paper what you hope to achieve, interrogating it with influencing factors, you will begin to understand both the likelihood of completing your goals and the things required for you to do so.
For your investors
Think of your business plan like an argument you will need to present to win the case of financing your venture. All entrepreneurs, even the ones with a huge cache of money saved before they begin, will need to approach investors to finance their companies.
In the early stages before you’ve accrued many customers or made many sales, your business plan is the strongest piece of evidence in your case. It not only shows you have planned ahead and thought of all the potential roadblocks, but it demonstrates how the investors themselves would benefit from getting involved with you, ultimately securing funding for your business.
What are the business plan formats?
Before putting together your business plan, you’ll need to determine what kind will serve you best. Business plan formats differ in length and content, depending on the size and type of company you plan to run. Typical business plan formats are:
Traditional business plan
The traditional business plan format is the most common and most comprehensive type. They often reach around 40 pages and are suited to entrepreneurs with long-term, large growth plans for their ventures, reaching investors they hope to convince to invest heavily in their businesses.
Approach the traditional format like you would a comprehensive blueprint of your business’s future. You want to cover as much as possible, to have already answered the majority of questions that might come up when someone takes a look at your business plan.
Below, we’ll lay out the steps to creating a traditional business plan, including how to draft these necessary components:
- Executive summary
- Business description and strategy
- Industry analysis
- Market analysis
- Organisation and management
- Financial projections
- Financing request
Lean business plan
This is the kind of business plan that works for a startup. If you’re keen to get started quickly and don’t need a huge amount of resources right at the beginning, a lean startup might be the way to go.
While it’s a concern that you might opt for a lean startup plan when a more comprehensive one would serve you better, it’s conversely true that spending too much time on a business plan when a lean one will suffice is detrimental too. Not only do you waste time and resources putting one together, but without a staff or management board involved, or many investors needed, you’re simply expending effort that need not be expended.
Putting together a lean startup plan, you won’t need to include as strict a list of components as the traditional model requires. Lean business plans are more about general subheadings denoting what to include.
- Identifying a problem
- Proposing your solution
- Presenting your key metrics
- Describing your unique value proposition
- Explaining your marketing strategy
- Estimating your target market
- Laying out your cost structure
- Listing your revenue streams
Nonprofit business plan
Crafting a nonprofit business plan will mean focusing on appealing to donors rather than investors. Therefore, your chief concern will be appealing to a problem and providing a solution to it.
Beyond this, the basic structure of a nonprofit business plan will be the same as a traditional one, or lean business plan depending on the size of your venture. Our steps below can be used for this kind of business plan.
How to write a business plan in 8 steps
Creating a business plan can seem like huge task. But if you break it down to just a few simple steps, it quickly become a quite manageable affair:
- Executive summary
- Business description
- Industry analysis
- Market analysis
- Organisation and management
- Financial projections
- Financing request
Step 1: Executive summary
Here is where you lay out the contents of your ensuing business plan. Use it to highlight the most important parts of your plan, which will depend on the kind of business you will be running.
If you are running a nonprofit business, emphasise the urgency of the problem you plan to solve, through data and figures which help to clarify the need for donors.
It’s with the executive summary that you want to capture the reader’s attention and then explain in brief terms what your business stands for and what you are going to do. You can think of the executive summary like a microcosm of the overall business plan.
Be sure to include:
- Objective of your business
- Target market you intend to reach
- Products and services you aim to provide
- Marketing and sales strategies you will employ
- Analysis of competitors in your chosen market
- Funding and budget allocation for strategies and operations
- Number of employees you will hire
- How you will implement your business plan
Lean business plans should also include the above components in an executive summary. Ideally, you will present them in a shorter form, through bullet points rather than explanatory paragraphs.
Step 2: Business description
With the business description, you can make clear what makes your business unique among the others in your market.
Answer these questions when putting together your business description:
What do I do that my competitors don’t? Analyse your main competitors’ websites and mission statements. What services do they provide that match yours? How will you offer yours differently? How do they manufacture their products in ways you could improve upon?
What is my company philosophy? Also called your mission statement or brand identity, your philosophy is the driving purpose for which you created your company. Brand identity is more common today with companies aligning themselves with causes, making this part of your business description equally important whether you are profit- or donation-based.
Who are my target customers? Demonstrate a clear understanding of who you wish to reach with your product or services. Consider demographic, region, wealth status, occupations, and age when outlining your potential customer base.
What are my goals? Finally, what do you hope to achieve with your business venture? Investors and donors want to see ambition, but they also want to see realism. Counter your ambitious goals with expectations that situate them in the realm of possibility without eliminating the possibility to do something great.
Step 3: Industry analysis
Ideally, you should know what industry you’re getting into before you start putting together your business plan. Industry analysis in a business plan is about presenting to interested parties a thorough understanding of more than just your competitors—it’s also about the historical developments and influencing factors within your industry: what has formed it and what might continue to shape it in the future.
Include in your industry analysis things like:
- The influencing factors in your industry: what causes the competition to intensify/decrease, how customers’ needs have changed/are changing, what technological innovations have/will change your industry, how globalisation affects your industry, which government bodies will regulate your industry
- The current attractiveness of the industry: whether or not now is the right time to be in your chosen industry, what are the challenges/advantages of entering this industry now, how does the trajectory of this industry look when forecasting its future
It’s also important to clarify where in that industry you stand, and to be realistic about your competition. For example, if you’re opening a film studio, it may be accurate to say that your industry includes Disney and Netflix, but it would be unrealistic to assume you can compete with them. Instead, further break down your industry competitors by finding ones more similar to you: what kind of films might your studio produce? What will the general budget of those films be? Who are the other studios with similar budget margins and output type?
Step 4: Market analysis
Market analysis and industry analysis may seem like the same thing, however they have a crucially different focus: where industry analysis focuses on your competitors, market analysis is focused on your customer base.
To return to the film studio example, the market will have to be more narrow than ‘people who watch movies’. Instead, it would be better to appeal to demographic by genre, censorship rating, style, etc. Gathering data on such a demographic will be too broad and impossible to determine any useful metrics or trends.
Sharpen your market analysis by introducing factors that will drain the pool a bit:
- Customer age/location/family status etc.
- Customer shopping habits
- Potential number of buyers/subscribers
- Amount customers are willing to spend
Keep your analysis broad enough to ensure growth if your venture is successful, but remember that at the business planning stage, accuracy and realistic expectations are key.
Step 5: Organisation and management
Less relevant for startups putting lean business plans together, this section will lay out the structure of your staff and board of directors. In other words, who is involved and what are they doing?
Divide this section into two sections:
- Business structure and people involved
- Management team or board of directors
Usually displayed visually, your business structure will lay out the hierarchy of your company. In the form of the chart, position the founders, management teams, and staff in whatever structure best suits you.
Here, bring a personal element to your organisational structure. Describe what each member (incl. yourself) of your management team brings to the company, with all of or a selection of these details:
- Ownership percentage
- Involvement level
- Ownership type (stocks, general partner, etc.)
- Company position
- Educational background
- Relevant skills and experience
- Relevant employment history
- Awards received
Step 6: Financial projections
Two year financial projections will help readers of your business plan understand your cash flow, loan repayment schedules—ultimately what you plan to do with your money and how. Similar to your business budget.
Here are the key elements of the financial projections section of your business plan:
- Spending and sales: daily operations like rent, utilities, production materials; one time purchases such as vehicles, software; countered with projected sales revenue for the month
- Financial projections: monthly expenses and revenue cash flow demonstrating cash flow for the first twelve months of business operations; determine projected annual income with statements and balance sheet predictions
- Contingency plan: demonstrate plan for unexpected expenses via financial projections and cash flows; how you plan to handle sudden events; present in the form of a cash reserve
As planning your business, start to plan your finances accordingly–with Penta’s digital business account.
Step 7: Financing request
Towards the end of your financial projections section is where you ask for funding from readers. Having presented a detailed and thorough understanding of your business operations and cash flows you can now make your case for corporate financing.
You will need to include in your financing request:
- Amount required
- Future financial plans
- Financial history
- Loan repayment terms
When filling in these requirements keep these things in mind:
- Who is my audience for this report? Your readers are your financiers. How will you reach them? Appealing for a profit-based vs nonprofit business will require a different kind of approach in this section, as you are speaking to donors vs people who are hoping to profit through their investments to you
- Have I been accurate in my presentation? Make sure the information you have provided previously matches the funding request you are about to make. The ending of your business plan should be like the ending of a good movie: it makes sense considering the events that preceded it
- Is my request reasonable? What you are asking for should be a balance between what you need and what you hope to receive. Asking too low will cause you to seek more financing later on, and asking too high might be met with scepticism or outright rejections
Step 8: Appendix
The final section of your report will provide any supporting documents that have been requested by your readers.
This could be:
- Credit history report
- Product pictures
- Reference letters
Writing the best business plan: tips and common mistakes
Understanding how to write your business plan most successfully means keeping several things in mind while putting together all the components. A good business plan is the product of a forward-thinking and logical business owner who knows what they want and how to deliver it clearly.
Keep these concepts in mind when putting your business plan together:
How long does your business plan need to be? Long-winded business plans that provide too much information when it isn’t needed. We tend to glaze over when looking at a document providing more than the necessary information. You don’t want potential investors glazing over your report.
A business plan might not seem like the right medium in which to convey passion, but this is misleading and potentially dangerous. Too many business reports are dry documents. Investors and donors want to see a business owner who believes in what they do, who sees a bright future ahead for themselves and the people who work with them. Use your opening section and business description to communicate what makes your business more than just a business—it’s your passion.
Know exactly who you’re speaking to. Keep your audience in mind at all times when crafting your document so that you only put in information relevant to those readers. A business plan that appeals too broadly will only harm your potential to convince.
How to Write a Business Plan: Conclusion
There are a lot of components to a good business plan. Whether lean or traditional, you will have to consider your venture from many different angles and back up a lot of your proposals with research. But the more effort you put into this stage of business formation, the stronger foundation on which you’ll start your business, increasing the likelihood of a long term career.
Hopefully, our extensive guide on how to write a business plan has provided some useful pointers on getting started with your business plan.
Stay secure with a Penta Business Banking Account
Your all-in-one business banking account to power up your business.