A business plan is more than just a document to impress potential investors, it’s the basis of a real strategic plan that ensures you’ve gathered all the information you need to start your business. Your business plan will guide your actions and provides you with goals and milestones so that you can track how you’re doing.
Even if you know how to write a business plan, every entrepreneur can benefit from additional tips to make their business plan even better. Read on to find out some of the best tips for writing a great business plan for your new business.
1. Start With a First Draft
Even if you never show it to anyone else, having a business plan is vital to your success and it starts with a first draft - you may need a business license first, though. Many small businesses start without any clear plan, haven’t checked out their competition, have no idea what their costs and income will be and so on. Not having a plan can cause a great business concept to fail. For professional legal help with this and other pressing matter when setting up a business, you can call upon top registered agent services like Swyft Filings, BizFilings, SunDoc Filings, Inc Authority, or MyCorporation.
You don’t just need a business plan when you get your business started, so it's not something you'll write just once. It should be a living, iterative document that can be applied to your business at any given time in its lifespan. Writing the first draft is an important first step but it's not the last. All too often, business plans are drafted and then left to gather dust.
2. Format Your Business Plan Properly
There is no one correct way to format a business plan, but there are generally accepted and expected ways a business plan should be organized. This is especially important when it comes to getting funding. Banks and lenders prefer a business plan that’s organized in a systematic way, with a clear progression of sections and capped off with financials and funding requests. According to the Small Business Association, the following sections comprise a conventional business plan format:
3. Use a Template, But Don’t Begin With the Executive Summary
Using a business plan template to ensure that you’ve included all the necessary elements in your business plan is a great idea, but the first item on the template, the executive summary, should be completed last even if it appears first in your final plan. In your executive summary, you’ll attempt to sum up your whole business plan in a few, short paragraphs. That means that you need the rest of the plan before you can begin writing the summary that encapsulates it.
Fortunately, there are plenty of places to get a business plan sample or business plan template. You can even find business plan samples and templates crafted for specific types of businesses. Here are three customized business plan examples that you can utilize:
Restaurant Business Plan
House Flipping Business Plan
Trucking Business Plan
4. Outline Your Company Structure Clearly
How your company is structured and organized is a central part of your business plan and how your business operates. Banks and lenders will want to see a clear and sensible company structure and management structure when they’re reviewing your plan. A poorly or vaguely organized company structure does not inspire confidence in lenders. A business founded on a weak company structure can undermine even the best business and thus raises the risk of the lender not being repaid by you.
5. Be Realistic and Concrete
It’s great to aim high, but if the success of your business is based on an outside chance, you reduce the odds of surviving the difficult first years after your business launches. Be cautious in your estimates and then aim for the stars in practice. It’s better to exceed your initial expectations than it is to fail to meet them.
Avoid making any statements you can’t substantiate and go easy on the adjectives. By using as many concrete facts as you can find, you can test out your business idea in the light of realities. Starting a new business always involves risk, but if you can gauge your risks and have a factual basis for confidence, you’ll know that your concept is sound.
6. Conduct Competitor and Market Analysis
Fact-finding can take a lot of time, but if you do your homework, you’ll have a good idea of what to expect from your new business. Research your market, your competitors and be realistic and even conservative in estimating your business income.
Market analysis involves gathering information about a market within an industry. The objective of market analysis is to survey the dynamics of the market and the customers that make up the market. Your market analysis should address the following questions:
Who are your potential customers?
What are your customers’ shopping and buying habits?
How big is your target market?
How much are potential customers willing to pay for a service or product?
Who is your competition in the market?
What are your competitors’ strengths and weaknesses?
Your market and competitor analysis is a key part of your business plan. A big reason is that it demonstrates to lenders that you have an excellent grasp of the industry landscape, which helps determine how and where your business can grow.
7. Write Your Own Business Plan
It doesn’t matter if your business plan is imperfectly phrased. It doesn’t matter if it isn’t pretty. You can always get someone else to shine it up for you later, but the essence of the business plan should be your thinking, your research and your ideas. If you use a consultant to advise and guide you, make sure that you’re still the driving force behind the plan. The end result should be something actionable that you can believe in.
8. Keep It As Brief As Possible
You need to strike a balance between including all the salient facts and writing a plan that’s so long and complex that no one, not even you, will feel like going through it. If you can say what you need to say in a few words, don’t stretch it to a paragraph just because it sounds nicer that way. Get to the point as quickly as possible.
If you’re pitching your plan to possible investors (see 'How to Find Investors' post), they’ll be more impressed by something that’s to the point and allows them to get a clear picture of what you’re planning. Clear and concise are two guiding principles when writing a business plan.
9. Flesh Out Company Financials and Projections
If you’ve never did budgeting for business before, it would be wise to hire an accountant to help you draw up your financial projections. You'll need to be able to answer questions like:
How much will it cost to get your business started?
What will your fixed costs or overheads be?
Where will you get the financing to launch your business?
What income can you expect the business to make?
Will you need a small business loan to operate your business financially?
The two sections of your business plan that directly involve financials are the funding request section and the financial projections section. According to Wells Fargo, your funding request should outline current and expected funding needs for the next five years. This should include a budget that demonstrates how your company will use the invested capital, as well as a long-term financial strategy.
You also need contingency plans so that your business doesn’t crumble if one of your predictions is slightly off track. You may even foresee times when you’ll be needing additional financing and can plan ahead for it.
If you use your business plan as a working document, you will find that you return to your financial projections more often than you’ll refer to anything else, so making them as realistic as possible is absolutely vital. Your first year’s projections are most important of all.
Outlining cost structure is another important part of fleshing out your business’ financials. The cost structure is a top-level model of the costs of an industry, organization or business model. When determining cost structure, you’ll categorize different costs, the proportional size of each category and a description of variable and fixed costs. What if your costs exceed your revenue? There are three possible solutions: cut down on costs, increase revenue or both. If you can’t do any of these, it’s time to put the business idea aside and start from scratch with a new concept.
10. Update Your Business Plan Regularly
Your business plan should be an iterative document. That means that during your first year of business, you should revisit and update your business plan at least quarterly. No matter how good your plan was to begin with, there will be some variances when it’s applied to reality. How does that affect your strategy going forward? Do you need to implement contingency plans to keep your business afloat?
If you’re able to run your business more or less according to plan, your quarterly reviews won’t be that extensive. At the end of your first year in business, you’ll do a full review of your business and its environment and adjust your strategy. This time around, it will be a lot easier, and your planning will be more accurate since it is based on your actual performance and experience.
Take note of trends in your market, changes in your business environment and what you can expect from your suppliers. By being alert to changes, you’ll be able to strategize more effectively and ensure that your business continues to succeed in a changing environment.
The Bottom Line
Learning how to write a business plan is only half the battle. Knowing how to improve it and continuously reiterate and adapt it is the other half. When writing a business plan, always be clear and concise with language. In terms of your business plan format, adhering to a traditional or generally expected format can improve your chances of getting lenders to fund your company. For banks and lenders, the financial section is naturally of the most immediate importance. But they will review the document as a whole, so every section of your business plan should be thoroughly researched and clearly written and organized. This will help your chances of funding your business and getting it up and running.