- A business plan clearly defines a company's goals and how it will achieve them.
- You can find templates for simple and traditional business plans online, including a free downloadable one created by Business News Daily.
- LivePlan, Bizplan, GoSmallBiz and Enloop all offer great business plan software that can take your business plan to the next level.
- This article is for entrepreneurs and small business owners who want to know how to write a business plan.
Having a road map helps you reach your journey's end successfully. Business plans do the same for small businesses. They lay out the milestones you need to reach to build a profitable small business. They are also essential for identifying and overcoming obstacles along the way. Each part of a business plan helps you reach your goals, including the financial aspects, marketing, operations and sales.
Plenty of online business plan templates are available to take some of the pain out of the writing process. You may benefit from simple, easy-to-follow business plan tools so you spend less time writing and more time launching your venture.
What is a business plan?
With most great business ideas, the best way to execute them is to have a plan. A business plan is a written outline that you present to others, such as investors, whom you want to recruit into your venture. It's your pitch to your investors, sharing with them what the goals of your startup are and how you expect to be profitable.
It also serves as your company's roadmap, keeping your business on track and ensuring your operations grow and evolve to meet the goals outlined in your plan. As circumstances change, a business plan can serve as a living document – but it should always include the core goals of your business.
Why do I need a business plan?
Starting a new business comes with headaches. Being prepared for those headaches can greatly decrease their impact on your business. One important step in preparing for the challenges your startup may face is writing a solid business plan.
Writing a business plan helps you understand more clearly what you need to do to reach your goals. The finished business plan also serves as a reminder to you of these goals. It's a valuable tool that you can refer back to, helping you stay focused and on track.
What are the three main purposes of a business plan?
Before you write your business plan, it's important to understand the purpose of creating it in the first place. These are the three main reasons you should have a business plan:
- Establish a business focus. The primary purpose of a business plan is to establish your plans for the future. These plans should include goals or milestones alongside detailed steps of how your company will reach each step. The process of creating a roadmap to your goals will help you determine your business focus and pursue growth.
- Secure funding. One of the first things private investors, banks or other lenders look for before investing in your business is a well-researched business plan. Investors want to know how you operate your business, what your revenue and expense projections are and, most importantly, how they will receive a return on their investment. [Check out our recommendations for the best business loan options.]
- Attract executives. As your business grows, you'll likely need to add executives to your team. A business plan helps you attract executive talent and determine whether or not they are a good fit for your company.
Your business plan can be written as a document or designed as a slideshow, such as a PowerPoint presentation. It may be beneficial to create both versions. For example, the PowerPoint can be used to pull people in, and the document version that contains more detail can be given to viewers as a follow-up.
Free downloadable business plan template
Business News Daily put together a simple but high-value business plan template to help you create a business plan. The template is completely customizable and can be used to attract investors, secure board members, and narrow the scope of your company.
Business plans can be overwhelming to new entrepreneurs, but our template makes it easy to provide all of the details required by financial institutions and private investors. The template has eight main sections, with subsections for each topic. For easy navigation, a table of contents is provided with the template. As you customize each section, you'll receive tips on how to correctly write the required details.
Types of business plans
There are two main types of business plans: simple and traditional. Traditional business plans are long, detailed plans that expound on both short-term and long-term objectives. In comparison, a simple business plan focuses on a few key metrics in concise detail so as to quickly share data with investors.
Simple business plan
Business model expert Ash Maurya has developed a simple type of business plan called a lean canvas. The model, which was developed in 2010, is still one of the most popular types of business plans emulated today.
A lean canvas comprises nine sections, with each part of the plan containing high-value information and metrics to attract investors. This lean business plan often consists of a single page of information with the following listed:
- Problem
- Solution
- Key metrics
- Unique proposition
- Unfair advantage
- Channels
- Customer targets
- Cost structures
- Revenue streams
Traditional business plan
Traditional plans are lengthy documents, sometimes as long as 30 or 40 pages. A traditional business plan acts as a blueprint of a new business, detailing its progress from the time it launches to several years in the future when the startup is an established business. The following areas are covered in a traditional business plan:
- Executive summary
- Company description
- Products and services
- Market analysis
- Management team
- Financial plan
- Operational plan
- Appendices
We lay out each area of a traditional business plan in detail below.
1. Executive summary
The executive summary is the most important section of your business plan, because it needs to draw your readers into your plan and entice them to continue reading. If your executive summary doesn't capture the reader's attention, they won't read further, and their interest in your business won't be piqued.
Even though the executive summary is the first section in your business plan, you should write it last. When you are ready to write this section, we recommend that you summarize the problem (or market need) you aim to solve, your solution for consumers, an overview of the founders and/or owners, and key financial details. The key with this section is to be brief yet engaging.
2. Company description
This section is an overview of your entire business. Make sure you include basic information, such as when your company was founded, the type of business entity it is – limited liability company (LLC), sole proprietorship, partnership, C corporation or S corporation – and the state in which it is registered. Provide a summary of your company's history to give the readers a solid understanding of its foundation. Learn more about articles of incorporation, and what you need to know to start a business.
3. Products and services
Next, describe the products and/or services your business provides. Focus on your customers' perspective – and needs – by demonstrating the problem you are trying to solve. The goal with this section is to prove that your business fills a bona fide market need and will remain viable for the foreseeable future.
4. Market analysis
In this section, clearly define who your target audience is, where you will find customers, how you will reach them and, most importantly, how you will deliver your product or service to them. Provide a deep analysis of your ideal customer and how your business provides a solution for them.
You should also include your competitors in this section, and illustrate how your business is uniquely different from the established companies in the industry or market. What are their strengths and weaknesses, and how will you differentiate yourself from the pack?
You will also need to write a marketing plan based on the context of your business. For example, if you're a small local business, you want to analyze your competitors who are located nearby. Franchises need to conduct a large-scale analysis, potentially on a national level. Competitor data helps you know the current trends in your target industry and the growth potential. These details also prove to investors that you're very familiar with the industry.
For this section, the listed target market paints a picture of what your ideal customer looks like. Data to include may be the age range, gender, income levels, location, marital status and geographical regions of target consumers.
A SWOT analysis is a common tool entrepreneurs use to bring all collected data together in a market analysis. "SWOT" stands for "strengths, weaknesses, opportunities and threats." Strengths and weaknesses analyze the advantages and disadvantages unique to your company, while opportunities and threats analyze the current market risks and rewards.
5. Management team
Before anyone invests in your business, they want a complete understanding of the potential investment. This section should illustrate how your business is organized. It should list key members of the management team, the founders/owners, board members, advisors, etc.
As you list each individual, provide a summary of their experience and their role within your company. Treat this section as a series of mini resumes, and consider appending full-length resumes to your business plan.
6. Financial plan
The financial plan should include a detailed overview of your finances. At the very least, you should include cash flow statements, and profit and loss projections, over the next three to five years. You can also include historical financial data from the past few years, your sales forecast and balance sheet. Consider these items to include:
- Income statement: Investors want detailed information to confirm the viability of your business idea. Expect to provide an income statement for the business plan that includes a complete snapshot of your business. The income statement will list revenue, expenses and profits. Income statements are generated monthly for startups and quarterly for established businesses.
- Cash flow projection: Another element of your financial plan is your projection for cash flow. In this section, you estimate the expected amount of money coming in and going out of your business. There are two benefits to including a cash flow projection. The first is that this forecast demonstrates whether your business is a high or low-risk venture. The second benefit of doing a cash flow projection is that it shows you whether you would benefit most from short-term or long-term financing.
- Analysis of break-even point: Your financial plan should include a break-even analysis. The break-even point is the point at which your company's sales totals cover all of its expenses. Investors want to see your revenue requirements to assess whether your business is capable of reaching the financial milestones you've laid out in your business plan.
Make sure this section is precise and accurate. It's often best to create this section with a professional accountant. If you're seeking outside funding for your business, highlight why you're seeking financing, how you will use that money, and when investors can expect a return on investment.
If you really want to master your financial plan, Jennifer Spaziano, vice president of business development at Accion, offers these helpful tips:
- Follow generally accepted accounting principles. As a rule, the financial part of your plan should follow the accounting principles set by the Federal Accounting Standards Advisory Board, especially if you're creating the plan to obtain a loan or a line of credit.
- Get fluent in spreadsheets. Spreadsheets are the best and most accepted way to present financial information.
- Seek outside assistance. Obtaining advice from your financial planner or accountant can help you put the numbers together and present them properly. If you use an accountant and your financial statements have been audited, state that in the plan.
- Look up templates. If you want to attempt writing the financial section on your own, there are resources.
7. Operational plan
The operational plan section details the physical needs of your business. This section discusses the location of the business, as well as required equipment or critical facilities needed to make your products. Some companies – depending on their business type – may also need to detail their inventory needs, including information about suppliers. For manufacturing companies, all processing details are spelled out in the operational plan section.
For startups, you want to divide the operational plan into two distinct phases: the developmental plan and the production plan.
- Developmental plan: The developmental plan details each step in the process of bringing your product or service to market. You want to outline the risks and the protocols you're taking to demonstrate to investors that you've examined all potential liabilities and that your business is well positioned for success. For instance, if workers (or your products) are exposed to toxic materials during the production process, in your developmental plan, you want to list the safety measures you will follow to minimize the risk of illness and injury to workers and consumers and how you plan to minimize any potential culpability to your business.
- Production plan: The production plan includes the day-to-day operation information, such as your business hours, the work site(s), company assets, equipment pieces, raw materials and any special requirements.
Free vs. paid business plan templates
You have your option of choosing between free and paid business templates. Both come with their own benefits and limitations, so the best one for you will depend on your specific needs and budget. Evaluating the pros and cons of each can help you decide.
Free templates
The biggest advantage of using a free template is the cost savings it offers to your business. Startups are often strapped for cash, making it a desirable choice for new business owners to access a free template. Although it's nice to use templates at no cost, there are some drawbacks to free business plan templates – the biggest one being limited customizability.
"The process of writing a business plan lets you personally find the kinks in your business and work them out," Attiyya Atkins, founder of A+ Editing, told Business News Daily. "Starting with an online template is a good start, but it needs to be reviewed and targeted to your market. Downloadable business plans may have dated market prices, making the budget inaccurate. If you're looking to get money from investors, you need a customized business plan with zero errors."
Janil Jean, head of overseas operations at LogoDesign.net, agreed that free templates offer limited customization – such as the company name and some text. She added that they are often used by a ton of people, so if you use one to secure funds, investors might be tired of seeing that business plan format.
Paid templates
The benefit of paying for business plan templates – or paying for an expert to review your business plan – is the accuracy of information and high customization.
"Your audience gets thousands of applications per day. What's to make your business plan stand out from the crowd when you're not there in the room when they make the decisions about your enterprise?" Jean said. "Visuals are the best way to impress and get attention. It makes sense to get paid templates that allow you maximum customization through design, images and branding."
On the contrary, the limitation to using a paid template is the cost. If your startup doesn't have the funds to pay for a business plan template, it may not be a feasible option.
The best business plan software
In case you take the route of investing money in your business plan, there are several great software programs available. Software takes the legwork out of writing a business plan by simplifying the process and eliminating the need to start from scratch. They often include features like step-by-step wizards, templates, financial projection tools, charts and graphs, third-party application integrations, collaboration tools and video tutorials.
After researching and evaluating dozens of business plan software providers, we narrowed down these four of the best options available:
LivePlan
LivePlan is a cloud-hosted software application that provides many tools to create your business plan, including more than 500 templates, a one-page pitch builder, automatic financial statements, full financial forecasting, industry benchmark data and KPIs. Annual plans start at $15 per month.
Bizplan
Bizplan is cloud-hosted software that features a step-by-step builder to walk you through each section of the business plan. Annual plans start at $20.75 per month.
GoSmallBiz
GoSmallBiz is a cloud-based service that offers industry-specific templates, a step-by-step wizard that makes creating a detailed business plan an easy one, and video tutorials. Monthly plans start at $15 per month.
Enloop
Enloop focuses on financial projections. It provides you with everything you need to demonstrate how financially viable your business can be, and walks you through the process of generating financial forecasts. Annual plans start at $11 per month.
Common challenges of writing a business plan
The challenges of writing a business plan vary. Do you have all the information about your business that you need? Does your industry have strict guidelines that you must adhere to? To help you prepare, we identified 10 of the most common issues you may face:
- Getting started
- Identifying cash flow and financial projections
- Knowing your target market
- Being concise
- Making it interesting
- Establishing workable goals
- Being realistic about business growth
- Proving that your idea is worth the risk
- Finding the right amount of flexibility
- Creating a strategy that you can implement
Crafting a business plan around these 10 challenges can prepare your business – and anyone who joins it – for a prosperous future.
How to overcome the challenges of writing a business plan
Although you won't accurately predict everything for your business, you can take preemptive steps to reduce the number of complications that may arise. For example, familiarize yourself with the business plan process by researching business plans and identifying how others successfully executed their plans.
You can use these plans as a basis; however, Rick Cottrell, CEO and founder of BizResults.com, recommends taking it one step further: Talk to small business owners and others who have experience.
"The business owner should talk to an accountant, banker, and those who deal with these plans on a daily basis and learn how others have done it," Cottrell said. "They can join startup and investment groups, and speak to peers and others who are getting ready to launch a business, and gain insights from them. They can seek out capital innovation clubs in their area and get additional expertise."
If you research how to write a business plan and still don't feel comfortable writing one, you can always hire a consultant to help you with the process.
"It is simply a time-consuming process that cannot be rushed," Cottrell added. "Millions of dollars can be at stake and, in many cases, requires a high level of expertise that either needs to be learned or executed in conjunction with an experienced business consultant."
Sean Peek, Jennifer Post, Chad Brooks, Howard Wen and Joshua Stowers contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article and related articles.