Creating a Business Plan: Everything You Need to Know
Creating a business plan is a great way to start for someone interested in creating a business or corporation.8 min read
Creating a Business Plan
Creating a business plan is a great way to start for someone interested in creating a business or corporation. If you are thinking about creating a business plan, a written description on the future of your business, make sure you invest the time to do it right. Following these quick steps will get you on the right path.
There are multiple sections of a business plan that all lay out the details you need to provide an outline of your company. They are as follows:
- Cover Page
- Executive Summary
- Business Description
- Company Overview
- Marketing Strategies
- Milestones and Metrics
- Competitive Analysis
- Design and Development Plan
- Operations and Management Plan
- Financial Factors
Most business plans detail the strategic plan to begin with certain resources and abilities to get to through the “startup” phase of the business, typically three to five years. Once the business is past the initial startup phase, there is typically a different business plan in place due to the inherent needs for different resources and increased assets.
A good business plan should be:
- Concise and easy to read
- Written in terms the audience will understand
- Strong, yet simple sentences
- Avoid buzzwords and jargon
- Spell out any acronyms
- Easy to scan – use bullet points for lists
Your business plan should be kept to a length that will engage the audience while including all of the necessary information, but not wordy and drawn out. An appropriate length of the main body of the text is typically around 20-30 pages, with another 10 pages or less in the appendix. An excessively long business plan is not just a lot of work for you, but it’s less likely to be read in its entirety.
One way to help summarize and simplify data is by using summary tables and simple business charts to highlight the main numbers. The physical look of the business plan should be simple and inviting. Be aware of the white space on the page.
A well-written business plan can serve as a great way to attract investors and potential employees. Taking the time and effort to write out the business plan forces you to review all aspects of the business at once - operational plans and milestones, value proposition, marketing assumptions, financial plan, and the staffing plan.
The executive summary is one of the most important sections in the business plan as it provides a brief summary of the entire plan in just one to two pages. If the intended audience only reads the executive summary section they should have a good idea of what your business is about and where it’s going. The executive summary should also be able to act as a stand-alone document, as sometimes an investor may ask to only see your executive summary.
Within the business plan, the tile page is first with the executive summary immediately following. The executive summary should tell the audience what you are seeking. It introduces the company, explains with the product or service provided will be, how will the owner be involved in the business, and what the business owner intends to receive from the reader.
Some may find it easiest to write the executive summary last, once the rest of the details of the business have been worked out other sections of the executive summary. Then, you can come back and pick out the highlights to summarize in the Executive Summary. Don’t go into detail here, but just pick some areas you want the audience to focus on and keep the information clear and concise.
In the executive summary, you should provide:
- A one sentence business overview
- The problem your business is going to solve
- What the solution is
- The target market and audience
- Who the team will be (owners, employees, and volunteers)
- Financial summary with funding requirements
- High level milestones
The business description section usually begins with a quick summary of your business’ industry including the current outlook as well focusing on the future potential growth opportunities in the industry. You will also want to include information of the different markets in your industry, such as emerging products and development that could either benefit or hurt your business.
The company overview section provides a summary of your company’s structure (including the formal legal structure and the operating structure), mission statement of the company, location, and some background on the history of the company (if the business is already in existence).
This is likely to be the shortest section in your business plan. If you are writing a business plan for an internal plan, you may not have to include this section at all.
The marketing strategies section will describe in detail your company’s product or service, including the problem (or need) for the product or service, as well as how the product or service will fit into the existing competitive landscape. A lot of research and analysis will have likely gone into the marketing strategy presented in this very detailed section.
This section will detail the target market for the product or service and list the multiple market segments for the business. Research for this section will force you to become familiar will all aspects of the market so you can determine the areas you want to focus and position your company. You will want to describe the growth projection for each segment of the market you plan to target.
A classic method of identifying target markets is to use the TAM, SAM, and SOM approach.
TAM: Total Available or Addressable Market, the total market your product will be available to
SAM: Segmented Addressable Market, or everyone you wish to make your product available to
SOM: Share of the Market, the group of potential buyers you will realistically reach
This section of the business plan should also include a sales plan, and detail how you plan to reach the target market. Information on how you plan to sell to the target market and what the pricing structure will look like are also in this section. Information on any potential partnership is important to include here as well.
If your company is reselling a product, buying it from one vendor and then remarketing it, you will need to detail where the products will come from and how you will deliver the products to the customers.
This section of the business plan will also include the positioning strategy, promotional plan, and distribution plan.
- Positioning strategy: Outline how you plan to price and present your product to your potential customers, and position yourself against the competitors.
- Promotion plan: Details how you plan to communicate with your customers. This includes how your product will be packaged and advertised. Any public relations and social media information on promoting your product will be included here.
- Distribution plan: Describe how you will get your product in to the hands of your customers.
Milestones and Metrics
This section of your business plan will describe the major (and sometimes minor) milestones and goals you plan to meet. It will also discuss how those milestones and goals will be measured, and any necessary dates attached to those milestones. If the business has already met some of the key milestones, be sure to include those accomplishments in this section as well. These major milestones are often referred to as traction. Some traction your company may have already accomplished could be items like initial sales, a pilot program, or a partnership that’s been developed.
The next item in this section are the metrics – or how you will measure your successes and failures of the milestones set forth. These metrics should be measured and watched on a regular basis to ensure the business is moving in the right direction.
This section will analyze the strengths and weaknesses within your market and will dive into the strategies you plan to use to break into the market and rise above competitors.
Design and Development Plan
The design and development section is intended to let the audience know how to product was designed and any future design changes that are anticipated. The development of the product should be charted in this section as well. This area should briefly touch on the development budget, if necessary.
Operations and Management Plan
This section describes how you plan to manage the business on a continuing basis. The operations plan can include an organizational chart of how various operations and management duties will be assigned in the company by division and by individual. The leadership team should be outlines in the management team charter section of the business plan. This area would include a brief bio on each member of the leadership team and should focus on education and relevant experience. A brief summary of the capital and ongoing expenses related to the operations of the company should be included here.
The financial data is included in one of the last sections in a business plan, even though it’s typically one of the most important concepts for the management team or investors.
Typical financial plans will include monthly projections for at least the first year, and then will provide annual projections for a period of three to five years. The financial projections will include information on the sales forecasts and a personnel plan detailing how much employees will be paid.
The profit and loss (P&L) section shows whether the company is profitable or taking a loss once all other financial aspects are accounted for. It should show when/if there is a break even point, and once the business is profitable, what will the profits look for.
The P&L spreadsheet includes everything from the projected sales, cost of goods, gross margin, operating expenses, operating income needed, anticipated taxes, interests, depreciation, amortization, total expenses and net profit.
If you need additional space for more information, images, charts, or graphs, you can place those in the appendix. If you refer to these items in the body of the business plan, be sure to locate the item is located in the appendix.
How Entrepreneurs can use a Sample Business Plan to Write their Own Plans
It's important that you don't feel intimidated with writing a business plan. It may seem like a large task in front of you, but it doesn’t have to be. If you’re having getting trouble started with drafting your business plan, you can review sample business plans online for inspiration and ideas.
The sample plans will give you an idea what the finished plan may look like, what it includes, and ways you can structure the plan. Try to find a plan that is a similar industry to your business. Although the business may be in a different location, try to find one that will operate similarly to the business you are planning.
A business plan should never be copied, as you want to ensure the individual aspects for your business are highlighted. A business plan is your opportunity to brag about what makes you different or better than the competition. Use the sample business plan to give you inspiration and ideas, and then highlight the unique concepts of your company and what set you apart from the competition.
The final business plan is a very important document, however the process of creating the document is the real value. This process will help you think through and finalize ideas. It will make you consider all aspects of opening a business. The business plan is valuable even once a business is up and running, as the three to five year plan should be used to make sure the company is staying on the right path and growing according to the path set out from the beginning.
Research shows that companies who use their business plan as an ongoing management tool to help grown their business will actually grow 30% faster than business who don’t. You will need to measure your actual results against the goals you set out in the business plan.
If you need additional information on creating a business plan, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of Google, Strip, and Airbnb.